Controlling the Use and Abuse of Poison Pills in Canada:
347883 Alberta Ltd v. Producers Pipelines Inc.
Robert Yalden*
As even the most cursory review of recent business publications would
reveal, considerable corporate restructuring is underway in several sectors of
North American industry. At the same time, government and business continue
to redefine industrial and trade policy in reaction to dramatic changes in the
structure and behaviour of markets at home and abroad.’
The legal issues that these developments are generating take on added sig-
nificance when one considers that there is little sign that the forces propelling
change are about to abate: several sectors of North America’s economy continue
to be either on the verge of profound upheaval or are in the midst of significant
transformation.2 The capacity of our business law to provide a framework that
facilitates rather than frustrates necessary change will continue to be put to the
test for the foreseeable future.3 It is therefore essential that one pay close atten-
tion to challenges to that legal structure that have arisen in particularly active
. Lecturer, Faculty of Law, McGill University.
McGill Law Journal 1992
Revue de droit de McGill
To be cited as: (1992) 37 McGill L.J. 887
Mode de citation: (1992) 37 R.D. McGill 887
‘As a study released by the Economic Council of Canada in 1991 observed:
International trade barriers are coming down between continental trading partners such
as the members of the European Common Market, and the United States and Canada,
as various agreements to that end are implemented. New and powerful trading blocs,
such as the one comprising the Pacific Rim countries, are emerging, while some exist-
ing blocs, like COMECON, have begun to disintegrate. The emerging blocs threaten
the hegemony of Western countries in many of their traditional areas of dominance, and
although the disintegrating ones present scarcely envisaged opportunities, the fluidity
to say nothing of the economic environ-
of the surrounding political environment –
ment – may for some time daunt all but the most intrepid entrepreneurial spirits.
See Economic Council of Canada, Corporate Mergers and Acquisitions: Evidence on Profitability
by A. Tarasofsky & R. Corvari (Ottawa: Supply and Services, 1991) at 1.
2Apart from the oil and gas industry, with which this article is particularly concerned, there was
major upheaval in 1991 in such areas as the manufacturing and retailing sectors of the Canadian
clothing industry.
3For particularly useful studies of the role of mergers and acquisitions in this process in Canada,
see B.E. Eckbo, “The Market for Corporate Control: Policy Issues and Capital Market Evidence”
in R.S. Khemani, D.M. Shapiro & W.T. Stanbury, eds, Mergers, Corporate Concentration and
Power in Canada (Halifax: Institute for Research on Public Policy, 1988) 143; V.M. Jog & A.L.
Riding, “Post-Acquisition Performance of Partially Acquired Canadian Firms” in Khemani, Sha-
piro & Stanbury, ibid., 233; Tarasofsky & Corvari, supra, note 1.
McGILL LAW JOURNAL
[Vol. 37
sectors of our economy and that one go on to assess whether our corporate and
securities law framework is making the grade.
One sector of our economy that has evolved markedly and that has made
extensive use of this business law framework is Canada’s petroleum industry.
Over the past decade, oil and gas companies have been subject to diverse pres-
sures, not the least of which has been a notoriously fickle oil price. Major play-
ers have had to abandon corporate missions adopted in the late 1970s and early
1980s and have formulated a variety of restructuring tactics. Acquisitions, be
they friendly or hostile, have in turn formed an integral part of this process of
adaptation and reorientation.4
Legal developments in the energy industry have frequently foreshadowed
those in other sectors of our economy.5 We do well, therefore, to pay attention
to the extent to which our corporate and securities law has succeeded in facili-
tating or hampering efforts to restructure petroleum companies while accommo-
dating the concerns of parties whose economic interests are affected by this
process.
In particular, it is important to assess whether institutions entrusted with
enforcing the principles that give shape to our business law have a clear under-
standing of the framework that they are working with and whether they are, in
turn, able to provide equally clear guidance regarding the manner in which sta-
tutory provisions should be interpreted. Absent a well-focused vision both of the
role of institutions like the judiciary and securities commissions in monitoring
the restructuring process and of the nature of the principles that each institution
may legitimately enforce, one runs the risk of having to live with a hotchpotch
of institutions and principles. Obviously, a confused regulatory climate is not
likely to produce the stable context that companies need to work within as they
develop tactics for addressing new economic challenges.
This comment concentrates on one institution, the judiciary, and on one
aspect of the acquisition process that courts in Canada are only beginning to
confront: the use of shareholder rights agreements (also known as “poison
pills”). Shareholder rights agreements are of course contentious devices that
have given rise to arguments about whether they play a constructive role in
take-overs or whether they serve only to harm the acquisition process. But it is
precisely because shareholder rights agreements are contentious that they pro-
vide insight into the strengths and weaknesses of the regulatory structure in
which corporate acquisitions take place. Because shareholder rights agreements
are controversial, they challenge institutions like the judiciary to pay close
4In addition to the examples considered in this article, one can point to NOVA Corporation of
Alberta’s decision in 1988 to expand into the petrochemical business through its acquisition of
Polysar Energy & Chemical Corporation. See also G. Boyd, “Big Oil Starts Thinking Small”
Canadian Business (January 1992) 24; E. Clifford, “Oil and gas producers get bad review” The
Globe and Mail (10 January 1992) B5; “Oil mergers, acquisitions up” The Globe andMail (31 Jan-
uary 1992) B3.
5In the United States some of the earlier hostile take-over bids were launched in the oil industry:
for example, in 1984, T. Boone Pickens’ Mesa Petroleum made an unsuccessful run at Gulf Oil
and in 1985 Mesa made an unsuccessful run at Unocal Petroleum Corp.
1992]
CASE COMMENTS
attention to the standards that they may legitimately use to regulate such
devices.
The comment explores this challenge in two parts. The first part provides
a summary of the first Canadian case in which a court has had to confront a
shareholder rights agreement: 347883 Alberta Ltd v. Producers Pipelines Inc.6
The second part engages in a critical analysis of the decision and is divided into
four sections.
The first section addresses and dismisses an argument concerning the ille-
gality of shareholder rights agreements that turns on a claim that the discrimi-
nation they effect violates a statutory provision concerning the equality of rights
that make up a share. The second section points to where the locus of the debate
regarding shareholder rights agreements is properly situated: the standards that
should govern their use. The third section delves into this debate through an
analysis of one of the more troubling features of the judgment: the Saskatche-
wan Court of Appeal’s reliance on the Canadian Securities Administrators’
National Policy 38.’ The analysis reveals that the judgment is likely to reinforce
the kind of regulatory confusion that our business law can ill-afford. The fourth
section explores why the Court may have been sidetracked into pursuing an
unsatisfactory line of inquiry. The open-ended nature of the oppression remedy
is singled out for particular attentign.
The comment concludes that rather than get bogged down in unpromising
arguments about the legality of particular features of shareholder rights agree-
ments, what is needed is clear thinking with respect to the circumstances in
which shareholder rights agreements may form part of the take-over process, the
distinctive roles of institutions like the judiciary and securities commissions in
ensuring that these devices are used constructively, and the tools that each insti-
tution may legitimately draw on in fashioning the constraints that it is author-
ized to place on the acquisition process.
I. The Rise and Fall of Producers’ Poison Pill
A. The Context
In late 1990, Saskatchewan Oil and Gas Corporation (Saskoil) revealed
that it was interested in acquiring all shares of Producers Pipeline Inc. (Produ-
cers). Producers, incorporated under Saskatchewan’s Business Corporations
Act,8 had become a public company in 1985. While its business initially
revolved around a crude oil gathering system in southern Saskatchewan, in
1988-89 it acquired a significant interest in a gas field and in a gas gathering
network and processing plant in western Saskatchewan. In April 1989, Produ-
611991] 4 W.W.R. 577, 80 D.L.R. (4th) 359 (C.A.), rev’g [1991] 4 W.W.R. 151, 91 Sask. R. 162
(Q.B.) [hereinafter Producers cited to W.W.R.].
7Adopted by the Canadian Securities Administrators on 1 August 1986. See (1986) 9 O.S.C.B.
4255. See also Ontario Securities Act and Regulations, with Policy Statements, Blanket Orders and
Notices, 20th ed. (Scarborough, Ont.: De Boo, 1991) at 3-108.
8R.S.S. 1978, c. B-10 [hereinafter SBCA].
REVUE DE DROIT DE McGILL
[Vol. 37
cers also purchased an asphalt plant at Moose Jaw. The result of this rapid
expansion was that the book value of Producers’ shares, as well as that of its
net assets, total revenues and net income increased significantly in the five years
after it went public. From Saskoil’s perspective, Producers was therefore an
attractive prospect. As the chambers judge noted, “[i]t is patently apparent …
that Producers has prospered significantly since it became a public com-
pany….,
” 9
In August 1990, Producers had 1 433 945 common shares outstanding and
230 000 preferred shares. These were distributed among approximately 170
shareholders.” The shares traded in the over-the-counter market, though there
had never been any significant trading. Prior to the spring of 1990, the over-the-
counter price for one Producers’ common share was approximately $5.15. But
the price began to move as 1990 unfolded. And on 23 August 1990, Scotia
McLeod informed an officer at Producers that the market price in the last trade
had been $10.00 per share.
Saskoil was also subject to the SBCA and at all relevant times its shares
were listed on the Montreal and Toronto stock exchanges. It engaged in crude
oil and natural gas exploration, development and production in western Canada,
as well as in the transportation and marketing of its products across North
America. On 27 August 1990, Saskoil wrote to the president of Producers sta-
ting that it wished to make an offer for all shares of Producers and that this offer
would likely be in the range of $16.00 to $18.00 per share.
In response to this proposed bid, Producers adopted a shareholder rights
agreement (S.R.A.) dated 27 August 1990. The agreement provided that
“rights” were to be granted to each shareholder on the basis of one “right” for
each share outstanding. Each “right” would entitle its holder to purchase 10
additional common shares for a price equivalent to $7.50 per share upon the
occurrence of a “triggering event,” that is, in the event that any “acquiring per-
son” acquired more than 10% of the outstanding shares of the company after 27
August 1990 and on or before 27 December 1990. Moreover, the acquiring per-
son would not be entitled to exercise its “rights.” The S.R.A. also included a
“permitted bid” provision which specified the types of take-over bids that were
deemed acceptable and that would not trigger the S.R.A. The definition was
drafted in terms that effectively excluded Saskoil from the range of permitted
bidders.
9Supra, note 6 at 157, Matheson J.
‘Penfund Capital (No. 1) Ltd (Penfund), an Ontario pension fund, owned all of Producers’ pre-
ferred shares and 280 000 of its common shares. It also controlled 170 800 common shares held
by other institutional shareholders, giving it ownership or control over a total of 31.4% of the com-
mon shares in August 1990. A nominee of Penfund was a director of Producers. Together, Penfund,
the directors of Producers and their associates controlled more than 50% of Producers’ voting
shares prior to December 1990. On 15 February 1991, Penfund converted all of its preferred shares
into common shares, giving it single-handed ownership or control of 680 000 common shares or
40.9% of the 1 633 945 common shares outstanding at that date.
“The definition excluded a take-over bid by a person who beneficially owned more than 5% of
the outstanding common shares of Producers or who was not “grandfathered” by the agreement
(see para. 1.01(t)(iv) of the S.R.A. (27 August 1990) between Producers Pipeline Inc. and the
1992]
CHRONIQUES DE JURISPRUDENCE
On 3 December 1990, acting through its wholly owned subsidiary, 347883
Alberta Ltd, Saskoil paid $18.25 a share for all the common shares held by the
former President and Chief Executive Officer of Producers. Saskoil therefore
came to control 143 200 common shares. This amounted to 9.9% of the out-
standing common shares, thereby ensuring that it remained below the S.R.A.’s
10% threshold until 27 December 1990, when the S.R.A. was meant to expire.
B. The Issues
Saskoil’s principal complaints focused on three matters. First, on 15
December 1990 Producers’ directors adopted a resolution whereby a bid would
have to be unanimously approved by Producers’ board of directors in order to
fall within the definition of a “permitted bid.” Saskoil emphasized that as a
result shareholders were being deprived of a say on whether the bid should be
accepted.
Second, although the agreement was initially meant to lapse on 27 Decem-
ber 1990, it was twice amended: once to extend its duration to 26 February 1991
and a second time to extend it to 15 April 1991. But these extensions were ini-
tiated solely by Producers’ board of directors and were never submitted to, let
alone approved by, Producers’ shareholders. And this despite there having been
an annual meeting of shareholders on 26 October 1990 and a special meeting
on 25 February 1991. Once again, Saskoil claimed that Producers’ shareholders
were being denied an opportunity to consider whether to accept the bid.
Finally, at the special meeting of 25 February 1991, a resolution was pas-
sed authorizing Producers to make an issuer bid to purchase a maximum of
560 000 common shares at a price of $21.50. While Saskoil voted against the
resolution, it was nonetheless approved by 88.2% of the outstanding shares rep-
resented at the meeting. The management information circular that had accom-
panied the notice of the special meeting stated that a shareholders agreement
was in the process of being concluded between a majority of the members of
Producers’ board of directors, their affiliates and associates, and a group of
shareholders controlled by an Ontario pension fund known as Penfund.12 This
agreement provided that its signatories would not tender their shares into a bid
other than the issuer bid unless the bid satisfied a number of conditions, includ-
ing a requirement that it be an all cash bid at $25 per share and that it be
approved by the board of directors. The shares that were subject to this agree-
ment represented approximately 45% of Producers’ outstanding shares. Saskoil
stressed that the effect of this agreement was both to deny Producers’ sharehold-
ers an opportunity to consider Saskoil’s bid and to force them to tender to the
issuer bid.
Acting at Saskoil’s behest, 347883 Alberta Ltd applied for an order under
section 234 of the SBCA (the statutory oppression remedy) that would set aside
Royal Trust Company). Since Saskoil acquired approximately 9.9% of the outstanding common
shares during the course of its bid, it fell outside the ambit of the definition of a “permitted bid.”
I’See the trial judgment, supra, note 6 at 154, 172-74, for details of Penfund’s involvement with
Producers.
McGILL LAW JOURNAL
[Vol. 37
the rights agreement and the issuer bid as being oppressive, or unfairly prejudi-
cial to, or as unfairly disregarding its interests and those of other Producers’
shareholders. 3
1.
Saskatchewan Queen’s Bench
Matheson J. dismissed the application. He observed that the S.R.A. did not
violate subsections 24(3) or 24(4) of the SBCA,”4 provisions which set out the
requirement that there be equality with respect to the rights attaching to shares
of the same class. In this instance, the discrimination that the S.R.A. effected did
“not arise because of any restrictions on shares, but with respect to the ‘rights’
granted by the S.R.A.”‘ 5 The case was therefore distinguishable from Bowater
Canadian Ltd v. R.L. Crain Inc., 6 in which the Ontario Court of Appeal disap-
proved of an attempt to differentiate between voting rights attaching to shares
within a class of shares.
After reviewing Canadian jurisprudence governing directors’ fiduciary
duties in the face of a take-over bid, Matheson J. asked: “When coupled with
the subsequent issuer bid, were the acts of the directors more consistent with
self-interest than with the bona fide interests of Producers?” 7 He concluded that
they were not. Producers’ directors had instead acted in the best interest of the
company:
U3Section 234 of the SBCA states:
234(1) A complainant may apply to a court for an order under this section.
(2) If, upon an application under subsection (1), the court is satisfied that in respect
of a corporation or any of its affiliates:
(a) any act or omission of the corporation or any of its affiliates effects a result;
(b) the business or affairs of the corporation or any of its affiliates are or have
been carried on or conducted in a manner; or
(c) the powers of the directors of the corporation or any of its affiliates are or
have been exercised in a manner;
that is oppressive or unfairly prejudicial to or that unfairly disregards the inter-
ests of any security holder, creditor, director or officer, the court may make an
order to rectify the matters complained of.
The wording of this section is virtually identical to that of section 241 of the Canada Business Cor-
porations Act, R.S.C. 1985, c. C-44 [hereinafter CBCA].
14Subsections 24(3) and 24(4) of the SBCA [both of which were reenacted in S.S. 1979, c. 6,
s. 8] state:
24(3) Where a corporation has only one class of shares, the rights of the holders
thereof are equal in all respects and include the rights
(a) to vote at any meeting of shareholders of the corporation;
(b) to receive any dividend declared by the corporation; and
(c) to receive the remaining property of the corporation upon dissolution.
(4) The articles may provide for more than one class of shares and, if they so
provide,
(a) the rights, privileges, restrictions and conditions attaching to the shares of
each class shall be set out therein; and
(b) the rights set out in subsection (3) shall be attached to at least one class of
shares but all such rights are not required to be attached to one class.
The wording is identical to subsections 24(3) and (4) of the CBCA.
15Supra, note 6 at 165.
16(1987), 62 O.R. (2d) 752, 46 D.L.R. (4th) 161 [hereinafter Bowater cited to O.R.].
7Supra, note 6 at 170.
1992]
CASE COMMENTS
[W]hen one considers that the directors established a fair market value for the
shares, which was significantly higher than the price range in which Saskoil con-
templated the purchase of all shares, that the directors thereafter established a mar-
ket at the top of the estimated fair market value range, and that the actions of the
directors were fully disclosed to the shareholders, who nevertheless, with the
exception of Saskoil, rather overwhelmingly approved of the issuer bid, it is quite
impossible to conclude that the directors have acted in a manner which was
oppressive or unfairly prejudicial to any shareholder. 8
2.
Saskatchewan Court of Appeal
a. The Majority
On appeal, the chambers judge was overturned. Sherstobitoff J.A. (Tallis
J.A. concurring) began his reasons by reviewing policy considerations under-
lying Canadian take-over legislation. He noted that in Canada the scope for
the deployment of the kind of coercive tactics that poison pills are intended to
counteract is limited by provincial securities laws that seek to protect share-
holders in the case of take-over bids. 9 As a result, Canadian securities regula-
tors have generally taken the position that poison pills are unnecessary in
Canada. In his view, this position was reflected in National Policy 38, which
favours unrestricted auctions and expresses concern regarding the use of defen-
sive measures that would deny shareholders the ability to make unconstrained
decisions about offers.2′ The question in this case was the extent to which the
policy considerations behind securities legislation should influence the
Court’s interpretation of (a) the directors’ power to act without approval of
shareholders, (b) the directors’ duty to act in the best interests of the corpora-
tion, and (c) the shareholders’ right to decide when they wish to dispose of their
shares.
Sherstobitoff J.A. noted that section 117 of the SBCA2′ states that the duties
of directors are owed to the corporation. But “the authorities say that the cor-
poration cannot be considered as an entity separate from its shareholders.” 22
8llbid, at 174.
19lbid. at 587, where Sherstobitoff J.A. pointed to two-tier bids, street sweeps and greenmail as
examples of the kind of coercive tactics that poison pills are intended to counter.
2Nevertheless, Sherstobitoff J.A. noted that the policy statement did provide room for defensive
tactics that are genuinely designed with a view to obtaining better offers. And he pointed out that
prior shareholder approval of corporate action against apprehended or actual take-over bids would,
in appropriate cases, allay concerns with respect to the potential for the infringement of sharehol-
ders’ rights that exists with respect to defensive tactics like the S.R.A. (ibid. at 587-88).
21Subsection 117(1) of the SBCA states:
117(1) Every director and officer of a corporation in exercising his powers and dis-
charging his duties shall:
(a) act honestly and in good faith with a view to the best interests of the cor-
poration; and
(b) exercise the care, diligence and skill that a reasonably prudent person
would exercise in comparable circumstances.
Subsection 122(1) of the CBCA is identical.
22Supra, note 6 at 590.
REVUE DE DROIT DE McGILL
[Vol. 37
Thus, “[t]he directors must act in the best interests of the corporation and all its
shareholders.” ‘
After reviewing Canadian and American jurisprudence concerning direc-
tors’ fiduciary duties in the course of a take-over bid,24 Sherstobitoff J.A. con-
cluded that the tests set out in the leading cases extend considerable deference
to bona fide business judgments of the directors. But in his view these cases did
not go far enough to enable him to determine the outcome of the issue before
him:
They give no principles for determining whether or not the defensive strategy was
reasonable in relation to the threat posed. They do not deal with the principle that
shareholders have the right to determine to whom and at what price they will sell
their shares as stated in Howard Smith Ltd. They fail to consider the effect of the
take-over provisions in the provincial securities legislation.2
As a result, he thought it necessary to turn to National Policy 38 for inter-
pretive guidance. He stressed that National Policy 38’s provisions were
designed both to limit unfair bidding tactics and to allow shareholders to decide
to whom and at what price to sell their shares. Thus,
defensive measures should not deny to the shareholders the ability to make a deci-
sion, and it follows that, whenever possible, prior shareholder approval of defen-
sive tactics should be obtained. There may be circumstances where it is imprac-
ticable or impossible to obtain prior shareholder approval, such as lack of time, but
in such instances, delaying measures will usually suffice to give the directors time
to find alternatives. The ultimate decision must be left with the shareholders,
whether by subsequent ratification of the poison pill, or by presentation to them
of competing offers or other alternatives to the take-over bid, together with the
take-over bid itself.26
Moreover, the onus was on the directors to show that at all times their acts were
reasonable in relation to the threat posed and were directed to the benefit of the
corporation and its shareholders as a whole, and not for an improper purpose
such as entrenchment of the directors.
231bid. Sherstobitoff J.A.’s observations are far from uncontroversial. For example, Jeffrey Mac-
Intosh has noted that there is a strong current of thought to the effect that the basic principle is
that directors owe their duties to the corporation and not to shareholders (“The Oppression Rem-
edy: Personal or Derivative?” (1991) 70 Can. Bar Rev. 29 at 43 n. 70). Similarly, referring to the
position in England, J.H. Farrar observes: “Basically directors owe these duties to the company and
not to individual shareholders” (Farrar’s Company Law, 3d ed. (Butterworths: London, 1991) at
380). However, Farrar goes on to.explain that acting in the best interests of the company
has traditionally meant in the interests of the shareholders and it is the directors’ sub-
jective opinion as to the interests of the corporators as a general body, balancing the
short-term interests of the present members against the long term interests of future
members which counts (ibid. at 384).
24Among the cases that Sherstobitoff J.A. reviewed were Howard Smith Ltd v. Ampol Petroleum
Ltd, [1974] A.C. 821, 1 All E.R. 1126 (P.C.); Teck Corp. Ltd v. Millar (1972), 33 D.L.R. (3d) 288,
[1973] 2 W.W.R. 385 (B.C.S.C.) [hereinafter Teck]; Exco Corp. v. Nova Scotia Savings & Loan
Co. (1987), 78 N.S.R. (2d) 91, 35 B.L.R. 149 (T.D.); Olympia & York Enterprises Ltd v. Hiram
Walker Resources Ltd (1986), 59 O.R. (2d) 254, 37 D.L.R. (4th) 193 (Div. Ct); Unocal Corp. v.
Mesa Petroleum Co., 493 A.2d 946 (Del. 1985).
2’Supra, note 6 at 594.
26Ibid. at 595.
19921
CHRONIQUES DE JURISPRUDENCE
With these guiding principles in hand, Sherstobitoff J.A. turned to Produ-
cers’ directors’ purpose in implementing the S.R.A. In his view, it was fair to
infer both that the directors saw Saskoil’s proposed bid of August 1990 to be
too low and that they implemented the S.R.A. to give Producers time to con-
sider alternatives. Given that subsequent valuations of Producers’ shares were
in the $19 to $21.50 per share range, Sherstobitoff J.A. concluded that the direc-
tors’ initial concerns were justified and that their actions to this point were rea-
sonable in all but one respect: “[t]hey did not put the S.R.A. to the shareholders
for ratification at the meeting in October 1990.” 27
While the motive for this initial failure to submit the S.R.A. to Producers’
shareholders may not have been improper, the motive underlying subsequent
decisions to amend and to extend the S.R.A.’s duration, to launch an issuer bid
and to enter into an agreement regarding the conditions under which shares
could be tendered to a bid other than the issuer bid was suspect:
The purpose of the defensive action is apparent: effective prohibition of the appel-
lant’s proposed take-over bid or any other take-over bid, until after the sharehold-
ers were forced to consider authorization of and tender to the issuer bid. The result
was to deprive the shareholders of any alternative to the issuer bid except to hold
their shares which, if marketable, would no doubt continue to trade at a value sub-
stantially less than appraised value. The fact that the S.R.A. was not put to the
shareholders for ratification either prior to, or simultaneous with, the issuer bid
confirms the view that the purpose of the directors was to force the issuer bid on
the shareholders without the choice of any possible alternative such as the appel-
lant’s proposed take-over bid or any other take-over bid.
These actions were in interference with the shareholders’ right to determine
the disposition of their shares. That raises the question of whether acting without
shareholder approval of the S.R.A. was necessary in the circumstances. No reason
was advanced by the directors for failure to put the matter to the shareholders. The
only inference which can be drawn from that is that the directors wished to make
the decision themselves in order to ensure their continued control of the company.
They thus acted for an improper purpose.2
Sherstobitoff J.A. then pointed to additional factors that supported the con-
clusion that the defensive action was neither reasonable in proportion to the
threat posed, nor taken in the best interests of the company:
a) the directors made no effort to show that a take-over by Saskoil would be
harmful to the corporation;
b) they made no effort to negotiate with Saskoil with a view to obtaining a better
offer;
c) they sought no competitive bid;
d) no effort was made to demonstrate that the issuer bid would provide better
value to shareholders than the take-over bid;
e) they agreed not to permit a bid that was not at least some 25% above the
appraised value of the shares; and
t) they offered no valid business reason for the issuer bid, “the completion of
which would further entrench the directors at the expense of a substantial
increase in the indebtedness of the company.”29
27Ibid. at 597.
28Ibid. at 598-99.
29Ibid. at 599.
McGILL LAW JOURNAL
[Vol. 37
These acts were not consistent with an effort to increase or maximize the
value of the shares. Instead, they pointed to only one objective:
the prohibition of any take-over bid until after completion of the issuer bid, the
result of which would be that the directors group would control a majority of the
shares, thus making the company impregnable to any take-over bid unacceptable
to the board.30
The result was that Producers’ shareholders had been denied the right to con-
sider possible take-over bids. As a Producers’ shareholder, 347883 Alberta Ltd
had the requisite status to claim relief under section 234 of the SBCA. Produ-
cers’ directors had acted beyond their powers and had thereby denied the appel-
lant the right to determine how it would dispose of its shares. This action was
unfairly prejudicial to the appellant and entitled it to relief under section 234.
Sherstobitoff J.A. concluded that the most appropriate relief was an order
to set aside the S.R.A. and to extend the closing date of the issuer bid from 28
March 1991 to 45 days after the date of his judgment. 3′ This would give the
appellant and any other interested persons the opportunity to make a take-over
bid and would enable shareholders to choose the bid to which they wished to
tender their shares.32
b. The Dissent
Bayda C.J. dissented. He distinguished between challenges to poison pills
based on the legal validity of the pill and challenges based on the way in which
a pill was being used. In his view, section 234 of the SBCA was not the appro-
priate vehicle through which to launch an attack to the legal validity of an
S.R.A. Section 234 was instead limited to complaints concerning alleged in-
equities flowing from the way a party had acted. Furthermore, he asserted that
it was only a party that had itself suffered a wrong that could bring an action
under this provision.
In this instance, it was not self-evident that 347883 Alberta Ltd had been
prejudiced. The prejudice that it alleged it had suffered “did not consist of loss
of money or loss of value but loss of control –
control in that specific sphere
involving take-over bids.”33 It was far from obvious that this sort of complaint
fell within the spirit of section 234 since it was difficult to think of a party that
had never had anything to do with the target corporation prior to its take-over
bid as someone who was oppressed. Nonetheless, Bayda C.J. concluded that
even if 347883 Alberta Ltd’s claim was not within the spirit of section 234, it
did fall within the letter of the section since the combination of the extensions
to the duration of the S.R.A. and the launching of an issuer bid had prevented
30lbid.
31That is, 45 days after 9 May 1991.
32Ultimately, Saskoil chose not to proceed with a new bid since this would have required it to
make a more substantial offer than that contained in the issuer bid. However, in early June 1991
Saskoil announced that it planned to purchase Producers’ Moose Jaw Asphalt plant. See “Company
News” The Globe and Mail (6 June 1991) B-14.
33Supra, note 6 at 625.
1992]
CASE COMMENTS
the appellant from making a take-over bid and since this could be said to con-
stitute a form of prejudice.
Bayda C.J. noted that the S.R.A. gave Producers’ directors the power to
change the time at which the S.R.A. would expire. But it also required that the
“rights” holders confirm any amendment. In this instance, no such confirmation
was given. As a result, the amendments to the S.R.A. were never effective. The
S.R.A. had therefore expired on 27 December 1990. After that date there had
been no obstacle to Producers’ proceeding with a take-over bid:
Between December 27 and February 20, 1991, if anything prevented Alberta from
making a take-over bid, it was Alberta’s own misinterpretation of the rights’agree-
ment and the law pertaining to it.34
Furthermore, since the appellant stated that it would not have objected to the
issuer bid without the concurrent presence of the rights agreement and since, in
effect, there was no longer a valid S.R.A. in place when the issuer bid was
launched, the appellant’s complaints with respect to the issuer bid were ulti-
mately without foundation.
II. Analysis
A. Discrimination
It is worth pausing before broaching the Court of Appeal’s decision in
order to deal with a red herring that plagues the analysis of poison pills in Can-
ada. This red herring is the notion that poison pills violate provisions in our
business corporations acts that stipulate that there be equality with respect to the
rights that make up shares of the same class.
For example, Jeffrey MacIntosh has advanced the proposition that the dis-
crimination effected by a poison pill may well be illegal precisely because it is
inconsistent with statutory provisions of this kind.35 He points to the Ontario
Court of Appeal’s treatment of subsection 24(3) of the CBCA in Bowater,36
where the Court struck down a provision in a company’s articles of incorpora-
tion that would have awarded more voting rights to an initial shareholder than
to subsequent holders of the same share.37 MacIntosh observes that the Ontario
Court of Appeal upheld the lower court’s conclusion that:
both at common law and under the CBCA rights attach not to shareholders but to
shares. Consequently, except as expressly permitted by the incorporating statute,
any provision in the corporate charter that results in shareholders of a class having
different rights constitutes improper discrimination and is void.3 s
MacIntosh concludes that this proposition can be applied to poison pills:
34Ibid at 630. The provision in question was para. 5.04(a)(i) of the S.R.A., cited in supra, note
11.35j. Macintosh, “Poison Pills in Canada: A Reply to Dey and Yalden” (1991) 17 Can. Bus. L.J.
323.36Supra, note 16.
37See supra, note 14, for the full text of this subsection.
38Supra, note 35 at 345.
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The pill allows all shareholders, except the acquiring person, to exercise the pill
rights once triggered. This clearly discriminates between shareholders of the same
class. On the basis of the Ontario Court of Appeal decision in Bowater, this dis-
crimination would be illegal.39
It is one of the more unfortunate aspects of the debate surrounding poison
pills that the term “rights” is used to denote more than one concept. As a result,
considerable confusion has arisen between the rights that are constitutive of a
share, the “rights” issued under an S.R.A. and the amorphous notion of share-
holder rights. This confusion has led some, like MacIntosh, to recharacterize the
relatively straightforward proposition embodied in provisions like section 24 of
the SBCA or CBCA, which are concerned with the rights that are constitutive of
a share, as a much broader claim concerning shareholder rights. The inability of
an “acquiring person” to exercise the “rights” issued under a poison pill is then
measured against this broader claim and is found wanting.
No doubt the broad proposition concerning shareholder rights derives some
of its attraction from the fact that it coincides with one of the general policy
objectives underlying aspects of our business corporations law and much of our
securities law: looking after the interests of shareholders. But however attractive
the end result, broad principles concerning the “fair” treatment of shareholders
do not underlie section 24 of the SBCA or CBCA. Matheson J. quite rightly
points out in the course of his reasons that statutory provisions like the one in
issue in Bowater are concerned solely with the rights that are constitutive of a
share (for example, the rights to vote, to receive dividends or to receive property
upon dissolution).” In no way are they concerned with the kind of “rights”
issued under an S.R.A. or with shareholder rights in some broad sense that goes
beyond the rights that are constitutive of the shares that they hold.
While Matheson J.’s treatment of this issue is quite sound, given the con-
fusion regarding the legality of the discrimination that a poison pill effects, it
is worth pushing a little further. Indeed, it is important that one clarify jutt why
it is that a provision like subsection 24(3) of the SBCA or the CBCA deals only
with the treatment of rights that are constitutive of a share and why it does not
constitute a general prohibition against all activity that discriminates between
shareholders.
The case law that underlies section 24 of the CBCA and, in turn, section
24 of the SBCA, confirms the soundness of Matheson J.’s position. For example,
the concept of equality that lies at the heart of early English company law cases
like Oakbank Oil Company v. Crum4 – where the House of Lords concluded
that all shares of a company were equally entitled to dividends regardless of the
amount paid up on those shares, and Birch v. Cropper42 – where the House of
Lords held that a company’s partly paid up common shares carried the same
rights as its fully paid up preference shares with respect to the distribution of
surplus assets, embodies equitable principles that are intricately linked to the
391bid.
40Supra, note 6 at 165.
41[1883] 8 A.C. 65 (H.L.) [hereinafter Oakbank].
42[1889] 14 A.C. 525 (H.L.) [hereinafter Birch].
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CHRONIQUES DE JURISPRUDENCE
number of shares that one holds. Indeed, in Birch, Lord Fitzgerald pointed to
Oakbank as an example of the method to be used when deciding what each
shareholder should receive, emphasizing that
the only equitable principle to be acted on in this case is that of equality … and
every shareholder should receive in respect of his share an equal proportion of
this surplus. [emphasis added] 43
Lord MacNaghten, for his part, observed that
[i]t is through their shares in the capital, and through their shares alone, that mem-
bers of a company limited by shares become entitled to participate in the property
of the company. [emphasis added] 44
In other words, the principle of equality at play in these cases was simply
intended to protect the rights that are constitutive of a share (in these instances
the right to dividends or to surplus assets), thereby ensuring that these rights
were respected and that one received one’s proportionate share of entitlements,
given the size of one’s holdings relative to the number of shares that the com-
pany had issued. The principle went no further: it neither addressed questions
about shareholder rights that went beyond the nature of the rights obtained
through a share, nor was it intended to act as a guarantee that the relative size
of one’s holding would never decrease.
If one examines subsequent decisions emanating from lower courts in
England, one finds that the House of Lords’ position in Birch was regularly
affirmed. 45 And while the House of Lords subsequently refined aspects of Birch
in Scottish Insurance v. Wilsons,46 this refinement consisted in drawing a firm
line between the status of common shareholders and that of preference share-
holders. Thus, their Lordships held that a proposed reduction of capital, which
involved returning capital to holders of preference shares with a view to extin-
guishing the shares prior to the company going into voluntary liquidation, was
not unfair or inequitable: the company’s articles of association formed a com-
plete statement of the preference shareholders’ rights and if the articles did not
specify that the preference shareholders had a right to surplus assets on distri-
bution, then one was not to assume that they did.47
But what is particularly important about this decision is that while the
House of Lords modified its approach to ascertaining a preference shareholder’s
rights, it continued to recognize that it was the rights that are constitutive of a
share that determine shareholders’ entitlements. Thus, whereas in the earlier
part of the twentieth century courts using the principle of equality of treatment
of shares had not sought to distinguish between the rights associated with dif-
ferent classes of shares, it was now clear that the governing principle was that
43Ibid. at 542.
441bid. at 546-47.
45See, for example, Re Espuela Land and Cattle Company, [1909] 2 Ch. 187 (Ch. Div.); Re Fra-
ser and Chahners Ltd, [1919] 2 Ch. 114 (Ch. Div.); Re William Metcalfe and Sons, [1933] 1 Ch.
142 (Eng. C.A.).
46[1949] A.C. 462.
471bid. at 481.
McGILL LAW JOURNAL
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there should be equality of treatment of shares only within a class: the general
equitable doctrine put forward in Birch was limited to shares of a particular
class. But the most important feature of the decision in Birch was unchanged:
the principle of equality of treatment remained intricately linked to .the number
of shares that were held. In other words, the principle was still intended to pro-
tect the rights that were constitutive of a share, and was in no way intended to
protect the size of a shareholder’s holdings relative to the number of shares that
a company had issued.
Cases in Canada that touch on this principle reiterate that it has to do with
rights that are constitutive of a share and that one should look to a company’s
articles for guidance with respect to the nature of those rights. And as with cases
in England, the rights at play in Canadian case law have most often been rights
to dividends or to a proportionate part of the distribution of surplus profits. At
no point have these cases suggested that the kind of “rights” that are issued
under an S.R.A. are subject to the equitable principle set out in Birch. Nor have
they set out broad claims about shareholder rights.
For example, one of the earliest Canadian cases to discuss the principle of
equality of treatment of shares was Wunderlich Brothers v. Northwestern
Mutual Fire Association,48 in which the Saskatchewan Court of Appeal asserted
that Birch and Oakland were part of a series of cases that reflected the principle
that there should be equality of treatment of shares, a principle that the Court
had no doubt was a fundamental tenet of Canadian corporate law. Dealing with
an attempt by an insurance company’s board of trustees to vary a dividend rate
after a dividend had been declared, such that the plaintiff would have received
dividends at a rate that differed from that got by others in the same class of pol-
icy holders, Martin J.A. observed that:
In the case of shareholders of a company where a dividend has been declared, all
holders of shares of the same class are entitled to participate on the basis of the
number of shares held without regard to the amount paid thereon unless due pro-
vision is made to the contrary: Birch v. Cropper; In re Bridgewater Navigation
(1889) 14 A.C. 525; Princeville Fox v. Jordan (1929) 64 O.L.R. 172 [emphasis
added].49
Similarly, in Re The Canada Trust Company and The Guelph Trust Com-
pany,5 where the issue was whether holders of partly paid up shares of the
Guelph Trust Company were entitled to share in the proceeds of the business
and the sale of the assets of the company in proportion to the shares held by
them, or only in proportion to the amount paid up on the shares held by them,
Schroeder J. indicated that he too viewed Birch as authoritative. As a result, the
Court held that the proceeds were to be distributed in accordance with the
number of shares held by particular shareholders.5
While Birch has received less attention in Canada than in England, its
claims with respect to equality of treatment of shares have been adopted by
41[1936] 1 W.W.R. 297, 3 I.L.R. 305 [hereinafter Wunderlich Brothers cited to W.W.R.].
491bid. at 303.
51[1950] O.R. 245 (Ont. Weekly Ct) [hereinafter Canada Trust Company].
51Ibid. at 249.
1992]
CASE COMMENTS
Canadian courts and ultimately lie at the root of section 24 of the CBCA. To be
sure, the wording of section 24 is such that companies have less freedom to dis-
criminate than under the Birch doctrine (under which one might arguably have
been able to vary the rights that made up shares of a class, provided that one
described the nature of these intra-class variations in the company’s articles).
And after Bowater, it is clear that even if one has more than one class of shares,
one is nonetheless required to treat the rights that are constitutive of shares of
a given class as equal in all respects. But this limitation on a company’s discre-
tion to vary the rights that are constitutive of a share within a class does not alter
the fact that ultimately it is through the rights that are constitutive of a share
(and not by virtue of some broader conception of shareholder rights) that a
shareholder obtains a proportionate part of the dividends, surplus, remaining
assets, votes or other entitlements made available to other shareholders of the
same class.
Moreover, the common law that underlies section 24 makes clear both that
the application of the equitable principle that has wound its way through
English and Canadian jurisprudence has always been limited to the bundle of
rights that are constitutive of a share and that it is a principle that is tempered
by a concern for flexibility with respect to corporate finance. Statements about
shareholders’ rights in these cases have been about rights got by virtue of their
being constitutive of a share and the courts today continue to conceive of a share
in this manner. Recently, for example, the Supreme Court of Canada observed
that:
A share is … a “bundle” of interrelated rights and liabilities. A share is not an
entity independent of the statutory provisions that govern its possession and
exchange. Those provisions make up its constituent elements. They define the
very rights and liabilities that constitute the share’s existence. The Canada Busi-
ness Corporations Act defines and governs the right to vote at shareholders’ meet-
ings, to receive dividends, to inspect the books and records of the company, and
to receive a portion of the corporation’s capital upon the winding up of the com-
pany…. 52
Thus, at no point have statements about the rights that are constitutive of
a share been ones that would support the claim that shareholders in Canada are
to be treated equally when dealing with a distribution of “rights” under an
S.R.A., “rights” that are in no sense constitutive of a share and that are instead
a creature of contract designed to provide rights holders with an option to pur-
chase a share.53 Indeed, Wunderlich Brothers and Canada Trust Company make
clear both that the principle of equality of treatment of shares speaks to the
52Sparling v. Caisse de ddp6t et placement du Quibec, [1988] 2 S.C.R. 1015 at 1024-25, 55
53Referring to “conversion privileges,” Hills observes that:
D.L.R. (4th) 63.
[T]he conversion privilege [is] an optional and alternative right of the holder in addi-
tion to and separate from the right to be paid a sum of money or to exercise the usual
rights of a stockholder. Although the privilege may not be divorced from the holder of
the security to which it is attached, it is no part of the security itself and must be con-
strued as if embodied in a separate instrument. Fundamentally, it is an independent
optional right [emphasis added] (G.S. Hills, “Convertible Securities – Legal Aspects
and Draftsmanship” (1930) 19 Calif. L. Rev. 1 at 2).
REVUE DE DROIT DE McGILL
[Vol: 37
rights that are constitutive of a share –
to the need to preserve a share’s integ-
rity –
and that one’s final standing relative to other shareholders is ultimately
dependent upon the number of shares held relative to the number of shares
issued, an equation about which the principle makes no guarantees.
The absence of any guarantee against dilution is no doubt the reason why
it was thought necessary to address the question of pre-emptive rights in the
CBCA. Section 28 provides that a company’s articles may be drafted to provide
shareholders with the option to preserve their relative position by acquiring
newly offered shares “in proportion to their holdings of the shares of that class.”
However, the legislature’s decision not to follow the Dickerson Committee’s
recommendation that pre-emptive rights be presumed (in the absence of express
provisions in the articles limiting or excluding these rights)54 reveals that the
legislature wished to leave the corporation considerable flexibility with respect
to the way in which it raises capital and that it therefore chose not to put stat-
utory guarantees in place respecting the size of one shareholder’s holdings rel-
ative to that of other shareholders. Reasoning a contrario from the Dickerson
Committee’s Report, which saw a need for presumed pre-emptive rights
because it felt that fiduciary duties were inadequate as a mechanism for control-
ling dilution, it is reasonable to conclude that in refusing to endorse this portion
of the Report, the legislature felt that fiduciary duties provided a more satisfac-
tory control mechanism than the Dickerson Committee was willing to concede
and that these duties should be used to control problems of dilution.5
Nor should one be surprised about the legislature’s willingness to tolerate
dilution. As long ago as 1932, in their seminal work The Modern Corporation
and Private Property, A.A. Berle and G.C. Means observed that permitting dilu-
tion was part of a general move to inject greater flexibility into corporate ma-
nagement. 6 So the legislature’s decision to permit dilution was just that: a con-
scious decision, designed to allow for flexibility with respect to the management
of a company’s capital accumulation process, yet one that subjected that process
to rules regarding directors’ fiduciary duties to the corporation.
Given this body of law and its implications for the distinction between the
treatment of shares and the treatment of shareholders, it should come as no sur-
54R.W.V. Dickerson, J.L. Howard & L. Getz, Proposals for a New Business Corporations Law,
vol. 1 (Ottawa: Information Canada, 1971) at 113, para. 114.
55See Dickerson, Howard & Getz, ibid., vol. I at 113, para.(s) 114-16. For examples of analyses
of a board of directors’ fiduciary duties in connection with decisions to dilute a shareholder’s posi-
tion see Teck, supra, note 24; Olson v. Phoenix Supply Ltd, (1984), 9 D.L.R. (4th) 451, [1984] 4
W.W.R. 498 (Man. C.A.).
5 6See The Modern Corporation and Private Property, rev’d ed. (New York: Harcourt, Brace &
World, 1968), where the authors observe:
Mechanisms have been made available permitting the “dilution” of participations
i.e., the reduction of the pro rata part of assets and earnings accruing to each share
through the issue of additional shares not representing a corresponding contribution to
the corporate capital. Here devices deleting the old common law “pre-emptive right,”
serve to remove from the shareholder his guarantee of an opportunity either to preserve
his ratable position, or else, to the extent that he has lost that position, to secure com-
pensation through the sale of his pre-emptive rights (ibid. at 142-43).
–
1992]
CHRONIQUES DE JURISPRUDENCE
prise that MacRae J. in Bowater should observe that “the rights which are
attached to a class of shares must be provided equally to all shares of that class,
this interpretation being founded on the principle that rights, including votes,
attach to the share and not to the shareholder.” [emphasis added]57 When the
distinction that MacRae J. draws is viewed in the light of the common law
underlying section 24 of the CBCA, it is difficult to see how his observations
could possibly be treated as a foundation on which to erect more general prin-
ciples regarding the treatment of shareholders.
When subsection 24(3) of the CBCA states that the rights of the holders
include the rights to vote, to receive dividends, and to receive remaining prop-
erty upon dissolution, the common law suggests quite strongly both that the
only appropriate interpretation of the term “rights” in this provision is those
rights that are constitutive of a share and that one must treat the rights stipulated
by subsection 24(3) as illustrative of the meaning of the term “rights” used in
the subsection. These rights will normally comprise rights to vote, to receive
dividends and to receive a return of capital upon a winding-up, but one should
also have regard to a company’s articles in order to ascertain whether there are
other rights that form part of that company’s shares. 8 However, rights that are
constitutive of a share are neither the same as “rights” issued under an S.R.A.
(which are creatures of contract and provide an option to purchase shares),
nor should they be confused with amorphous and general statements concern-
ing shareholder rights (which embody notions about the fair treatment of
shareholders).
The principle of equality of treatment of shares of a class referred to in
Bowater and in statutory provisions such as subsection 24(3) of the CBCA is in
the end quite limited in scope and certainly does not provide a basis for a cred-
ible argument challenging the legality of a poison pill. If anything, explicit re-
ferences in the case law to the fact that one’s entitlements depend on the pro-
portionate size of one’s holdings make quite clear that the courts have long been
aware that the relative size of one’s holdings might vary, even if in absolute
terms one retains the same number of shares. This is not to say that there may
not be other grounds on which one could base arguments about the illegality of
poison pills, grounds that do reflect broader concerns about the treatment of
shareholders. But it is to say both that one cannot simply assume that such con-
cerns underlie those parts of our business corporations acts that are concerned
to facilitate capital accumulation and that section 24 of the CBCA cannot serve
as the backbone of an argument regarding the unfairness of differential treat-
ment of shareholders.59
57Supra, note 16 at 754.
58Indeed, subsections 49(13) and 49(14) of the CBCA stipulate that the rights which are attached
to shares of a class must be described on share certificates issued by the corporation.
59These points are canvassed in summary form in P. Dey & R. Yalden, “Keeping the Playing
Field Level: Poison Pills and Directors’ Fiduciary Duties in Canadian Take-Over Law” (1990) 17
Can. Bus. L.J. 252 at 272-74. For examples of American cases that make the mistake of recharac-
terizing statutory provisions concerned about the status of a share as provisions that are also about
shareholder equality, and that thereby collapse the share/shareholder distinction, see Bank of New
York v. Irving Bank Corporation, 528 N.Y.S.2d 482 (N.Y. Sup. Ct 1988), aff’d without opinion (1st
McGILL LAW JOURNAL
[Vol. 37
B. The Locus of the Debate
While other arguments exist with respect to the reasons why a poison pill
might be thought to violate some of the more technical features of our business
corporations law, one must at all times remain sensitive to the extent to which
these arguments ultimately rely on broader claims regarding what constitutes
fair treatment of shareholders rather than on narrow claims with respect to the
rules regarding such matters as capital formation. Only if one focuses directly
on the larger picture can one hope to talk openly about the nature of the fairness
claims being drawn on and the factors that should be taken into account when
formulating broad principles with respect to the treatment of shareholders. For-
tunately, both the Chambers Judge’s decision and that of the Court of Appeal
in Producers suggest that the focus of the legal debate regarding poison pills is
likely to be less on their legality given the rules governing corporate finance and
more on big picture issues concerning the way in which poison pills should or
should not be used.
This is not to say that somewhere in Canada a court may not one day con-
clude that a poison pill contains a feature that is prima facie inconsistent with
a particular statutory provision concerning the nature of a share. But in the long
haul Canadian business lawyers are likely to continue to prove adept at design-
ing poison pills that circumvent technical objections to the way pills operate. As
a result, the focus of inquiry will in all likelihood continue to be whether devices
of this kind should be allowed in the first place and, if so, what kinds of fairness
principles should govern their use.
Questions concerning the desirability of poison pills are, at the end of the
day, linked to deeper issues concerning the most appropriate way to structure a
framework in which take-over bids may be effected. A lively debate exists with
respect to this issue,6″ a debate that is well beyond the scope of this article. Suf-
fice it to say that despite the arguments for prohibiting poison pills, neither our
legislators nor our securities regulators have so far taken the position that poison
pills are an anathema. On the contrary, it would appear that at least in so far as
securities regulators are concerned, the real issue is whether poison pills are
being used to advance the bidding process or are instead being manipulated
either with a view to preventing take-over bids from being made or in order to
hamper the ability of shareholders to choose between competing bids.
For example, in a decision concerning Canadian Jorex Limited, the Ontario
Securities Commission (OSC) recently observed that a poison pill that had
served the purpose of providing an opportunity for a competing bid to come for-
ward should not then prevent shareholders from choosing between different
take-over bids. The OSC was not concerned with the legal validity of the poison
pill. Instead, it focused its attention on the way in which the pill was being used
in the course of a take-over battle. While the Panel that decided the case was
Dept 4 October 1988); Amalgamated Sugar Co. v. N.L. Industries 644 F Supp. 1229 (S.D.N.Y.
1986); Smith v. Preway 644
. Supp. 868 (W.D. Wis. 1986).
6See for example, J. Macintosh, “The Poison Pill: A Noxious Nostrum for Canadian Sharehold-
ers” (1989) 15 Can. Bus. L.J. 276; Dey & Yalden, ibid.; MacIntosh, supra, note 35.
1992]
CASE COMMENTS
quick to emphasize that OSC staff had not asked it to consider anything other
than issues concerning the use of the pill in question, it is nonetheless revealing
that the OSC did not use the occasion to suggest that there was something inher-
ently problematic about the way a poison pill functions.6″ The majority’s deci-
sion in Producers is consistent with the approach that the OSC has so far
favoured: in both instances emphasis was placed primarily on whether the
S.R.A. was misused rather than on whether the S.R.A. was prima facie illegal.
Where, then, does this leave Bayda C.J.’s dissent in Producers? Bayda C.J.
makes a valid point with respect to the logic of the S.R.A. that Producers
adopted: by the very terms of the S.R.A., absent subsequent “rights” holder
approval, any attempt to extend the duration of Producers’ S.R.A. was ineffect-
ive.62 But from a practical point of view it is not hard to envisage the dilemma
that Saskoil faced: should it proceed with a bid on the assumption that the
S.R.A. was not in effect until the amendments were approved and risk finding
out subsequently that a majority of shareholders were prepared to approve the
S.R.A.? Would such approval retroactively validate the S.R.A., a situation that
might ultimately give rise to a significant dilution of its holdings?
This is a dilemma that any bidder will face when confronted with the kind
of situation at play in this case and it is not clear that Bayda C.J.’s analysis pro-
vides much comfort. If a company’s directors threaten that they will seek share-
61Ontario Securities Commission, In the Matter of Canadian Jorex Ltd and Manville Oil & Gas
Ltd (1992), 15 O.S.C.B. 257 (21 January 1992) [hereinafter Canadian Jorex]. The OSC ordered
the removal of the poison pill that Canadian Jorex had put in place for three reasons:
i) the Manville bid could not proceed to the Jorex shareholders unless the rights plan
was removed;
ii) there was no reason to believe that maintaining the rights plan was going to result
in any other party joining the Jorex auction; and
iii) there was no reason to believe that keeping the rights plan in place was going to
lead to any further enhancement of the Manville bid (ibid. at 264-65).
The OSC also observed that the pill had succeeded in attracting a competing bid from Canadian
Trans-Arctic & Southern International Corp., a company whose principal shareholder had been the
Chairman, President and CEO of Jorex until the day before the Trans-Arctic bid was announced.
So having attracted a competing bid, and with no real prospect of an increase in Manville’s bid,
the OSC concluded that the time had come “when the pill has got to go” (ibid. at 264). In the end,
the Trans-Arctic bid won out over the Manville bid. See “Former Jorex President wins his company
back” Financial Post (9 January 1992) 16; T. Carlisle, “Jorex, Manville both gain from deal”
Financial Post (13 January 1992) 15.
Perhaps the most intriguing feature of the decision comes where the OSC observed:
For us, the public interest lies in allowing shareholders of a target company to exercise
one of the fundamental rights of share ownership –
the ability to dispose of shares as
one wishes – without undue hindrance from, among other things, defensive tactics
that may have been adopted by the target board with the best of intentions, but that are
either misguided from the outset or, as here, have outlived their usefulness (ibid. at
266).
It is disappointing that the Panel did not explain on what authority it relied for the proposition that
freedom with respect to the disposition of one’s shares is a “fundamental right” associated with
share ownership and that it did not explain in greater detail what constitutes “undue hindrance” on
the exercise of this right. One can expect to see further cases that will force the OSC to discuss
these concepts at greater length.
62Supra, note 6 at 628-30.
REVUE DE DROIT DE McGILL
[Vol. 37
holder approval that will retroactively validate an S.R.A., how many bidders
will invest substantial sums in a bid and live with the risk that a court will find
the retroactive validation legal? At the end of the day, the reality of the matter
is that the fundamental question concerning poison pills in Canada remains the
issue that the majority addressed: is a board of director’s purpose in adopting
a poison pill one that is in the best interests of the corporation and what should
the judiciary’s point of reference be in developing standards of conduct that
directors must live up to when implementing and manipulating a poison pill?
C. National Policy 38 as an Interpretive Guide
One of the most disappointing features of Sherstobitoff J.A.’s judgment is
its failure to provide much in the way of an answer to a question that he himself
singles out as one of “the fundamental issues” in the case: namely, the extent
to which securities policy should influence the interpretation of particular pro-
visions of a business corporations act.63 While it ultimately becomes clear that
he feels that it is entirely appropriate that securities policy play a role in the
interpretation of certain corporate law provisions, at no point does he explain
why this constitutes an acceptable interpretive approach. Instead, he suggests
that the absence of sufficient guidance in case law concerning directors’ fidu-
ciary duties in the course of a take-over bid leaves him with no alternative but
to turn to National Policy 3 8.1 And yet the issues surrounding this interpretive
move are by no means inconsequential: it is far from obvious why policy state-
ments, issued in a securities law context, that have never been considered by the
legislature shouldbecome the touchstone for the interpretation of corporate law
provisions that are an expression of the will of the legislature.
This is not to say that the interpretive move that Sherstobitoff J.A. engages
in is necessarily illegitimate. It may be that a coherent account of the way in
which one bridges policy statements and statutory provisions can be provided.
Moreover, such a link may be necessary in order to produce a framework in
which our corporate and securities law work together to provide an effective
package within which corporate transformation may take place. Nonetheless, it
remains the case that in seeking to make the link, Sherstobitoff J.A. provides no
principled account of the reasons for departing from traditional principles of
statutory interpretation when confronting a business corporations act. It is there-
fore important that one consider the forces driving Sherstobitoff J.A. to adopt
a rather novel interpretive strategy and that one then assess the merits of such
an approach.
Those familiar with traditional canons of statutory interpretation will recall
that one of the cornerstones of late nineteenth and early twentieth century stat-
utory interpretation was Maxwell’s classic work The Interpretation of Statutes.65
The starting point for Maxwell’s theory of statutory interpretation was the prop-
osition that in a representative democracy the views of a popularly elected legis-
631bid. at 590.
64bid at 594-95.
65P.B. Maxwell, The Interpretation of Statutes, 2d ed. (London: Maxwell & Son, 1883).
1992]
CHRONIQUES DE JURISPRUDENCE
lature must prevail over those of an appointed judiciary. Whenever faced with
a statute, the court’s job was to ignore its own judgments about the policy best
suited to resolving a particular problem and to concentrate on the task of discov-
ering and implementing the will of the legislature as expressed through the stat-
ute. Maxwell stressed that:
Statute law is the will of the legislature; and the object of all judicial interpretation
of it is to determine what intention is expressly or by implication conveyed by the
language used, in so far as it is necessary for the purpose of determining whether
a particular case or state of facts which is presented to the interpreter falls with-
in it.66
For years, this account has shaped judicial approaches to statutory interpre-
tation. How, then, is one to understand Sherstobitoff J.A.’s decision not to limit
himself to the statutory provision before him and to resort instead to policy that
securities regulators have enunciated? The question is that much more intrigu-
ing when one bears in mind that Saskatchewan’s legislature has never explicitly
sanctioned the policy statement that he turns to for guidance. So the phenom-
enon at play in this case is not just an instance of a court deferring to the exper-
tise of a regulatory body with respect to the interpretation of its constitutive leg-
islation, a practice that has. received considerable judicial support.67 Nor is the
Court of Appeal simply attempting to reconcile the interpretation of two statutes
that must inevitably interact. Instead, the Court of Appeal goes one step further
and draws on a statement of policy that forms part of an ongoing effort on the
part of regulators to make clear their conception of the way in which one con-
stituency, the shareholders of the target corporation, must be treated in the
course of corporate acquisitions.
While the result of extensive consultation,’
it remains the case that the
policy statement is in no sense an expression of the will of the legislature; it
represents the view of securities regulators. Moreover, it reflects a very parti-
cular set of policy concerns.69 This is hardly surprising: contemporary securi-
ties regulators have made clear that they are concerned to ensure that sharehol-
ders are treated fairly in the course of a take-over bid. But it is not self-evident
that this objective, however admirable, necessarily underlies all aspects of our
business corporations acts. The latter also reflect a concern to allow corpora-
tions and their boards a measure of flexibility in the pursuit of corporate objec-
661bid. at 1. He went on to observe:
The business of the interpreter is not to improve the statute, but to expound it … to give
it a construction contrary to, or different from that which the words impart or can pos-
sibly impart, is not to interpret law, but to make it; and judges are to remember that
their office is jus dicere, not jus dare (ibid at 7).
67See, for example, Madame Justice Wilson’s concurring reasons in National Corn Growers
Assn. v. Canada (Import Tribunal), [1990] 2 S.C.R. 1324 at 1336-46, 74 D.L.R. (4th) 449.
68The OSC issued a request for comments on 23 March 1984. A draft policy was published on
7 December 1984. A new version of the policy was released in February 1986 that reflected many
of the comments. This redrafted policy became the basis for National Policy 38.
69For an excellent discussion of the rationale underlying National Policy 38, see S. Beck & R.
Wildeboer, “National Policy 38 as a Regulator of Defensive Tactics” in Meredith Memorial Lec-
tures 1987: Acquisitions and Take-Overs (Cowansville, Qu&: Yvon Blais, 1988) 119.
McGILL LAW JOURNAL
[Vol. 37
tives,7″ flexibility that has at times had to be balanced carefully against the inter-
ests of various constituencies, including shareholders. Indeed, Ronald Daniels’
excellent work on the forces at play in shaping Canadian business corporations
acts makes clear that all jurisdictions in Canada have had to struggle to recon-
cile these distinct policy objectives.71 And it is far from obvious that the specific
balance between shareholder protection and flexibility that securities regulators
favour is identical to the one that our legislatures have endorsed. This comment
has already suggested both that the CBCA’s provisions governing capital accu-
mulation reveal a clear concern to promote flexibility and that Parliament chose
to subject this process to rules regarding directors’ fiduciary duties to the cor-
poration rather than to the kind of principles regarding the protection of share-
holders that securities regulators have increasingly brought to bear on their ana-
lyses of corporate transactions.
The tensions in Sherstobitoff J.A.’s reasoning reflect difficult issues that
are at the heart of contemporary Canadian business law: the appropriate rela-
tionship between our business corporations law and our securities law and the
extent to which the particular balance of principles underlying our business cor-
porations law must be adjusted in order to accommodate growing concerns
regarding the treatment of shareholders. Unfortunately, it has been some time
since this debate was played out in the legislature. In that setting, one might
have hoped to see an open discussion about the balance between flexibility and
fairness (and between shareholders’ interests and other stakeholders’ interests)
that is most appropriate to current economic realities and that would most effec-
tively ensure that corporate Canada remains able to compete internationally
while treating shareholders and other stakeholders fairly. But these issues are
instead being hammered out through a curious dialectic between courts, securi-
ties regulators and the business community. Given the absence of the legislature
from this ongoing debate, it is little wonder that Sherstobitoff J.A. felt com-
pelled to leave Maxwell to one side and to look beyond the terms of the statute
in order to interpret section 117 of the SBCA.
7As F.H. Buckley observes in Corporations: Principles and Policies (Toronto: Emond Mont-
gomery Publications, 1988):
Though one might have thought that nineteenth century corporations legislation would
offer greater freedom to incorporators, in fact modem corporations are considerably
more facilitative. The history of modem corporations law is one of reduction of man-
agement restrictions and shareholder rights in matters of investment and financial pol-
icy, including the term of the corporation’s existence, the businesses it might take up,
self-dealing standards, share issuances and repurchases, dividend policy and charter
amendment. Corporate law barriers to business decisions have never been lower than
under modem “enabling” corporate statutes such as the CBCA (ibid. at 152).
Of course, with this greater flexibility have come new remedies designed to limit the potential for
abusive treatment of shareholders: for example, the oppression remedy.
71R.J. Daniels, “Should Provinces Compete: The Case for a Competitive Corporate Law Market”
(1991) 36 McGill L.J. 130. Daniels sets out the problem that governments in Canada have to con-
tend with:
The existence of overlapping securities and corporate laws in Canada means that the
benefits of a province’s corporate law regime may be undermined by the operation of
provincial securities law administrators located in the incorporating province or, more
significantly, in other provinces (ibid. at 183).
1992]
CASE COMMENTS
Discomfort with Maxwell’s conception of statutory interpretation is of
course hardly a new phenomenon. In an administrative law setting, many have
pointed to the implausibility of some of Maxwell’s most basic premises, for
example the notion that there is a single easily ascertained “intention” underly-
ing a given statute. They have gone on to discuss the problems surrounding
attempts to isolate a single legislative intent in a multiparty legislature with an
ever-growing body of representatives.7′ It has been accepted that, on occasion,
it is entirely appropriate for a regulator entrusted with the administration of a
statute to dispense with the notion that Parliament’s intention is always self-
evident and to draw on its expertise in order to interpret provisions in that stat-
ute. But these critics have nonetheless remained sensitive to the need for a dem-
ocratic frame of reference, one that is ultimately sanctioned by the legislature.
That is, they have stressed that courts and regulators are subordinate to the legis-
lature and must respect the logic of the legislation that they are called upon to
interpret.73 Few have gone so far as to suggest that in interpreting a statutory
provision one should feel free to look to an entity other than the legislature in
order to draw on its pronouncements, not simply about how best to interpret the
statutory provision in question, but about how broad issues of public policy
should be dealt with. Yet this is precisely what the Saskatchewan Court of
Appeal is up to.
This is not to say that it is inappropriate for a regulator to issue policy state-
ments. Far from it. One can readily justify a regulator’s decision to issue state-
ments regarding the way in which it will structure its discretion. The literature
in administrative law has long suggested that this is entirely appropriate.74 But
this is a different matter from a situation in which a court entrusted with inter-
preting one statute reaches out to policy statements designed by regulators who
are responsible for the enforcement of another statute. And absent clear evi-
dence that the statutes are fundamentally analogous, at least in so far as their
underlying policy objectives are concerned, one can be forgiven for wondering
whether it is appropriate for a court to engage in such a manoeuvre.
This comment has already suggested that it is far from clear that the policy
objectives underlying our business corporations and securities acts are identical.
Our business corporations acts display a profound concern to balance the need
for flexibility regarding the structure, financing and management of a corpora-
tion with concerns about accountability, whereas securities acts in Canada focus
almost exclusively on the treatment of shareholders.75 Before courts entrusted
with interpreting provisions of the former seek inspiration from a regulator’s
statements about its approach to the latter, should the legislature not first pro-
vide a clear indication that in its view the objectives underlying these statutes
are in fact identical? While the Canadian securities administrators take the view
72See, for example, J. Landis, The Administrative Process (New Haven: Yale U. Press, 1983);
J. Willis, “Three Approaches to Administrative Law” (1935) 1 U.T.L.J. 53.
Statutory Interpretation” (1988) 46 U.T. Fac. L. Rev. 136.
73See, for example, R. Yalden, “Deference and Coherence in Administrative Law: Rethinking
74See, for a recent discussion of this issue, H.N. Janisch, “Consistency, Rulemaking and Con-
solidated Bathurst” (1991) 16 Queen’s L.J. 95.
75With respect to business corporations acts, see Buckley, supra, note 70.
REVUE DE DROIT DE McGILL
[Vol. 37
that “the primary objective of take-over bid legislation is the protection of the
bona fide interests of the shareholders of the target company,”76 is it clear that
the Saskatchewan legislature conceives of the issues surrounding take-over bids
in these very same terms?
After careful analysis, one might of course reach the conclusion that the
objectives underlying the rules governing take-over bids in the SBCA are iden-
tical to those underlying rules regarding take-over bids found in securities leg-
islation and that it is therefore appropriate to draw on securities regulators’ pol-
icy statements in interpreting either act’s take-over bid provisions. But
Sherstobitoff J.A. certainly does not provide us with this analysis and it is far
from self-evident that detailed analysis would have produced such a conclusion.
One can quite credibly contend both that the take-over bid provisions found in
a business corporations act must be read in a manner that displays sensitivity to
the objectives of the act as a whole, and that this contextual interpretation will
produce a different result than a contextual analysis of the take-over bid provi-
sions found in securities legislation; all the more so when one considers that
business corporations acts are concerned not just with the treatment of share-
holders, but also with providing management with a flexible structure through
which to pursue business objectives.77 Contextual analysis of this kind may be
all that much more essential when one is faced with a poison pill, since neither
business corporations acts nor securities acts speak specifically to the way in
which one should handle this phenomenon.
Moreover, in issuing National Policy 38, the Canadian Securities Admin-
istrators made clear that even if they were not prepared to formulate a detailed
code of conduct, they were nonetheless interested in developing standards that
went beyond those imposed by the fiduciary duties required by corporate law.7″
It is not unreasonable, then, to suggest that they issued this policy statement pre-
cisely because they were not convinced that our business corporations acts (at
least as they have so far been interpreted) place enough emphasis on the fair
treatment of shareholders. This may be a valid concern. But do courts interpret-
ing a business corporations act have a mandate to embrace new standards of
conduct developed by securities regulators without at the very least showing
how they flow from the structure of the relevant business corporations act?
The end result in Producers is that in the course of interpreting provisions
having to do with fiduciary duties, the Court of Appeal has reached out to a pol-
icy statement that was issued in order to set out standards that securities com-
missions felt were not captured by directors’ fiduciary duties. Thus the Court of
76See National Policy 38, para. 2.
77For example, note that whereas the CBCA’s take-over provisions contain measures whereby
an acquiring company can squeeze out remaining shareholders of the target corporation once 90%
of its shares have been tendered to the bid, the Ontario Securities Act’s take-over bid provisions
do not deal with this issue. This difference reflects the CBCA’s greater preoccupation with flexi-
bility in the management of companies and is but one illustration of the different perspectives and
objectives that motivate the two statutes’ approaches to take-over bids.
78See Beck & Wildeboer, supra, note 69 at 119-20, where the authors confirm that National Pol-
icy 38 was in part a response to the perceived inadequacies of fiduciary law.
1992]
CHRONIQUES DE JURISPRUDENCE
Appeal ends up adopting a role similar to the one that securities regulators have
carved out for themselves: that is, it has embraced fairness claims developed
independently of any analysis of the SBCA. While one can understand the posi-
tion taken by securities regulators, it is not easy to formulate a rationale for
courts taking it upon themselves to enforce National Policy 38.” It would have
been considerably easier to justify an approach to this case that focused squarely
on section 117 of the SBCA in light of the division of power between sharehold-
ers and management that the Act put in place and that then went on to provide
an account of the reasons why, given that framework, shareholders should not
be prevented from having the final say with respect to the adoption of a poison
pill and the acceptability of a given take-over bid.
While Sherstobitoff J.A. quite rightly notes that Canadian law with respect
to directors’ fiduciary duties in the course of a take-over bid does not speak to
the use of poison pills, there is American case law that tackles this question and
that can quite readily be looked to for inspiration.’ For example, in City Capital
Associates Limited Partnership v. Interco Incorporated,s” the Delaware Court of
Chancery went quite some way to unpacking the implications of directors’ fidu-
ciary duties for the use of poison pills. In concluding that Interco’s S.R.A. had
outlived its usefulness, the Court observed:
In this instance, there is no threat of shareholder coercion. The threat is to share-
holders’ economic interests posed by an offer the board has concluded is “inade-
quate.” If this determination is made in good faith … it alone will justify leaving
the poison pill in place, even in the setting of a non-coercive offer, for a period
while the board exercises its good faith business judgment to take such steps as
it deems appropriate to protect and advance shareholder interests in light of the
significant development such an offer doubtless is. That action may entail nego-
tiation on behalf of shareholders with the offeror, the institution of a Revlon-style
auction for the Company, a recapitalization or restructuring designed as an alter-
native to the offer, or other action. Once that period has closed, and it is apparent
that the board does not intend to pursue a Revlon-style auction, or to negotiate for
an increase in the unwanted offer, and that it has taken such time as it required in
good faith to arrange an alternate value-maximizing transaction, then in most in-
stances, the legitimate role of the poison pill in the context of a non-coercive offer
will have been fully satisfied.8 2
The Delaware courts, then, have accepted that a board should have time to
explore alternate opportunities to maximize shareholder wealth. But they have
emphasized that it would not be appropriate to allow a board to use a rights plan
79Even the argument that Sherstobitoff J.A. does advance, namely the paucity of jurisprudence
with respect to the implications of fiduciary standards for this case, seems odd. At the time that
Producers was decided, securities regulators had never issued reasons (or provided a policy state-
ment) explaining how poison pills should be handled in light of National Policy 38. One can hardly
contend, then, that the jurisprudence surrounding National Policy 38 was better developed than that
surrounding fiduciary standards governing the use of poison pills. I am grateful to Clay Homer,
managing partner of Oster, Renault, Ladner’s New York office for pointing out this peculiar feature
of the judgment.
80For a more detailed analysis of the way in which American jurisprudence might be looked to
for inspiration, see Dey & Yalden, supra, note 59 at 274-80.
8’551 A.2d 787 (Del. Ch. 1988).
821bid. at 798.
McGILL LAW JOURNAL
[Vol. 37
to deprive shareholders of the opportunity to accept an offer once it becomes
clear that the board has not found an acceptable alternative that will enhance
shareholder value. And they have reached this conclusion without having to
draw on policy statements issued by securities regulators in order to remedy
perceived weaknesses with fiduciary duties as a control mechanism. Moreover,
the kinds of factors that the Delaware courts have focused on are similar to the
ones that Sherstobitoff J.A. was concerned with when, having reviewed the
implications of National Policy 38 in some detail, he then went on to list various
considerations that led him to conclude that Producers’ defensive action was
neither reasonable in relation to the threat posed, nor taken in the best interests
of the company.83 But in Sherstobitoff J.A.’s reasons these factors are presented
almost as though they were an afterthought. They do not form the centrepiece
of his analysis.
Thus, while Sherstobitoff J.A.’s belated concern about directors’ fiduciary
duties to a corporation’s shareholders was entirely appropriate, his analysis
should have placed more emphasis on developing law with respect to those
fiduciary duties within the context of the SBCA. Analyses of the extent to which
our corporate law is consistent with policy statements issued by securities reg-
ulators were subsidiary matters in this context that should not have come to
overshadow judicial analysis of fiduciary principles (at least until such time as
legislators make clear that it is appropriate for courts to interpret business cor-
porations acts in that manner). While securities policies are no doubt pertinent
to the debate, they are pronouncements made by Securities Administrators and
should serve to guide securities regulators. If these pronouncements are consist-
ent with the corporate law on fiduciary duties, so much the better. If not, then
perhaps both courts and securities regulators should look to matters within their
jurisdiction to see whether changes are needed. Harmonization may well be a
desirable thing. No doubt it is also time that our legislatures faced up to the chal-
lenge of better integrating corporate law and securities law. But courts are nei-
ther legislatures nor securities regulators and should not reach to policy state-
ments issued by the securities administrators as if they were the touchstone for
their approach to questions concerning fiduciary principles. All the more so
when there is well developed jurisprudence in other jurisdictions with respect
to fiduciary duties that can assist a court in considering how best to interpret the
statutory provision that it has a mandate to apply.
It is equally important to remember that at the end of the day, however
much their jurisdiction may have expanded, securities regulators are not legis-
latures either. While the objectives of securities law are important, they are not
necessarily identical with those of our business corporations acts. The latter
should continue to develop in accordance with their own logic. Courts must of
course be sensitive to the framework that our securities law establishes. But sen-
sitivity to that framework is a different matter than a process whereby business
corporations acts are hijacked by securities law and in turn become immune to
policy considerations that are not central to securities regulation. Authors such
as Daniels have pointed to the dangers at play in a context in which there are
83Supra, note 6 at 598-99.
1992]
CASE COMMENTS
overlapping securities and corporate laws. As he notes: “to the extent that secu-
rities regulators are able to impinge on the scope traditionally accorded corpo-
rate law, the integrity of each government’s corporate law product is compro-
mised. ‘
The point is well-taken. If legislatures conclude that ultimately securities
policy should rule the day, then so be it. But until they make clear that they have
endorsed that state of affairs, courts have no mandate to subsume our business
corporations law to the views of securities administrators.
D. The Use of the Oppression Remedy
But how is it that Sherstobitoff J.A. allowed himself to reach beyond the
ambit of the SBCA in order to draw on a policy statement designed to remedy
perceived weaknesses with the law regarding fiduciary duties? Is counsel
entirely free from blame? After all, it was counsel that sought an order under
the statutory oppression remedy, a remedy that provides courts with a notori-
ously large degree of discretion with respect to the kinds of equitable consider-
ations that they may look to when evaluating the fairness of the impugned con-
ductY Moreover, having run the case through the oppression remedy, it was
counsel that then suggested that the Court look to National Policy 38 for inter-
pretive guidance.
It comes as no great surprise that counsel invoked the oppression remedy.
Several authors have suggested that it is one way of controlling the use of poi-
son pills.86 The oppression remedy’s focus on the particularities of the wrong
done to the complainant, as opposed to the corporation, no doubt accounts for
some of its attractiveness in this context. Moreover, an oppression application
may be commenced by a summary form of procedure. 7 In a fast moving take-
over battle, the oppression remedy therefore offers distinct procedural advan-
tages for those seeking a speedy way to disarm a poison pill.
But the oppression remedy presents substantive issues of its own that result
from the open-ended nature of the provision. In providing courts with the man-
date to address acts that are “oppressive,” “unfairly prejudicial,” or that
“unfairly disregard” the interests of shareholders (among others), the provision
opens the door to courts to develop new fairness standards that go beyond those
seen in the context of an analysis of directors’ fiduciary duties. Jeffrey MacIn-
tosh has quite astutely observed that its open-ended nature has made it difficult
for courts to pin down a consistent set of criteria that might be used to formulate
appropriate fairness standards. 88
84Supra, note 71 at 184.
85See supra, note 13 for the text of the statutory oppression remedy.
86See supra, note 60 at 305-06 n. 136; supra, note 35 at 347; J. Forsyth, “Poison Pills:
Developing a Canadian Regulatory and Judicial Response” (1991) 14 Dalhousie L.J. 158 at
185.87See section 248 of the CBCA and MacIntosh, supra, note 23 at 54 n. 125.
88See “Bad Faith and the Oppression Remedy: Uneasy Marriage or Amicable Divorce” (1990)
69 Can. Bar Rev. 276, especially at 281-87.
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[Vol. 37
The difficulties surrounding the fluid nature of the provision are particu-
larly evident in Producers. Bayda C.J., who does at least focus squarely on the
section, barely succeeds in convincing himself that the case can be addressed
through this provision. The result is that his reasons never really sink their teeth
into the substance of the section or of the real problems that Producers gives
rise to. His analysis does little to unpack the fairness standards that should be
applied to the use of poison pills in the context of an oppression application.
As for the majority’s judgment, although one might have expected to see
some discussion of the matter, Sherstobitoff J.A. gives just as little attention to
fleshing out the fairness standard embodied in section 234 of the SBCA. Indeed,
even though the action is brought under section 234, he chooses to address the
issues in this case through the Act’s provisions regarding fiduciary duties, turn-
ing to National Policy 38 when he runs into interpretive difficulty. The oppres-
sion remedy is treated as little more than a section concerning the range of court
orders that may issue once one has found a breach of section 117 of the SBCA.
Thus, Sherstobitoff J.A. never spells out the kind of fairness principles that are
at the heart of the oppression section, fairness principles that might well place
greater emphasis on shareholder interests than do traditional rules with respect
to fiduciary duties and that might in turn serve as a solid foundation on which
to build principles designed to control poison pills. While it is this comment’s
contention that concerns regarding the impact of a poison pill can be addressed
through a sophisticated analysis of directors’ fiduciary duties, the oppression
remedy is obviously capable of providing assistance in instances where it is felt
necessary to look to additional fairness standards. Moreover, unlike National
Policy 38, the oppression remedy has the merit of forming part of both the
SBCA and CBCA, thereby enabling courts to respect the integrity of the statute
they are called upon to interpret.89
Unfortunately, one cannot even explain Sherstobitoff J.A.’s decision to
reach out to National Policy 38 as an attempt to compare and possibly harmo-
nize the oppression remedy’s fairness standards with those underlying securities
legislation. Perhaps a credible argument could be made in favour of such a ven-
ture. There is no doubt that as with National Policy 38 the oppression remedy
reflects a concern to go beyond fiduciary duties in order to secure the fair treat-
ment of shareholders.9″ Once again though, it would be essential to conduct such
an analysis of the oppression remedy within the confines of the SBCA with a
view to seeing what conception of fairness a contextual reading of the Act
89As J. MacIntosh, J. Holmes & S. Thompson note: “The broad drafting of the oppression rem-
edy has supplied the courts with a legislative mandate to break free of the fetters of the common
law.. .” [emphasis added] (“The Puzzle of Shareholder Fiduciary Duties” (1991) 19 Can. Bus. L.J.
86 at 86-87). For a recent analysis of the oppression remedy, see the Ontario Court of Appeal’s
decision in Brant Investments Ltd v. Keeprite Inc. (1991), 3 O.R. (3d) 289, 80 D.L.R. (4th) 161.
9See MacIntosh, supra, note 23 at 45, 57, where the author confirms that the oppression remedy
was designed to deal with perceived weaknesses with fiduciary duties by creating a standard of fair
conduct that captures a wider range of conduct than the common law of fiduciary duties. It is worth
noting, however, that the oppression remedy is not concerned solely with shareholders and might
therefore be thought to embody a somewhat different perspective on the range of constituencies
that warrant protection than that favoured by securities regulation.
1992]
CHRONIQUES DE JURISPRUDENCE
entails and whether the end result is consistent with fairness principles that
securities regulators favour.
Instead of engaging in this kind of carefully contained project, Sherstobi-
toff J.A. chose section 117 of the SBCA as the starting point for his analysis and
sought to incorporate National Policy 38 into his interpretation of the Act’s
rules regarding fiduciary duties. It matters little who is ultimately responsible
for making this line of reasoning seductive, provided that one sees that of the
options that were available to the Court this was in fact one of the least attract-
ive. Whether one favours efforts to refine fiduciary principles, to explore the
rules relating to acts that are “oppressive,” “unfairly prejudicial,” or that
“unfairly disregards” a given constituency’s interests, or to come up with a
hybrid control mechanism that incorporates aspects of fiduciary duties and the
oppression remedy, any one of these options promises to respect the integrity of
the business corporations law that courts are called upon to interpret. Because
these options are properly within the jurisdiction of the courts, they provide a
much more satisfactory basis on which courts may build principles designed to
control the use of poison pills than the one that the Court of Appeal sets out in
Producers.
Conclusion
This comment began by observing that if we are to succeed in meeting the
challenges that a rapidly evolving economic climate gives rise to, then it is
essential that companies in Canada have a clear idea of the regulatory context
in which corporate transformation may take place. Unfortunately, the Court of
Appeal’s decision in Producers does little to assist the development of princi-
ples governing the use of poison pills that are grounded in a well focused picture
of the respective roles of the courts and securities commissions in the acquisi-
tion process, principles that are in turn sensitive to the policy objectives under-
lying the legislation that each of these institutions is called upon to enforce. Of
the various options for controlling poison pills that were open to the Saskatche-
wan Court of Appeal, the one chosen was one of the least compelling and serves
only to muddy the waters.
Instead of providing us with a creative analysis of the law regarding fidu-
ciary duties or the oppression remedy that would have helped companies under-
stand what business corporations legislation demands of them with respect to
the use of a poison pill, the decision simply defers to National Policy 38. But
this policy statement has not only received very limited application in connec-
tion with poison pills,91 it also falls squarely within the jurisdiction of an insti-
tution whose role with respect to the acquisition process is quite distinct from
the one that courts are entrusted with under business corporations legislation.
Thus, the decision in Producers gives rise to a situation in which the distinctive
91At the time that this comment was completed, the Canadian Jorex case, supra, note 61, was
the only decision concerning the application of National Policy 38 to a poison pill, a decision that
was handed down after the Saskatchewan Court of Appeal made use of National Policy 38. See
supra, notes 61, 79 in connection with this point.
McGILL LAW JOURNAL
[Vol. 37
roles of courts and securities commissions are ignored and the objectives under-
lying corporations and securities law are confused. This is precisely the kind of
hotchpotch that this comment has already suggested we can ill-afford.
On a positive note, the decision does have the virtue of moving the debate
regarding poison pills away from rather arid objections to their legality based
on technical provisions in business corporations acts that concern the process of
capital accumulation. This comment has suggested that Matheson J. was quite
right in dismissing objections to poison pills that rely on section 24 of the SBCA
or CBCA. Sustained analysis of the history underpinning this provision reveals
that rather than prohibiting dilution of a shareholder’s position, the section
forms part of a series of provisions that were drafted with an eye to the possi-
bility that in some contexts dilution would be entirely appropriate, provided that
this occurred in a manner consistent with fiduciary principles. Moreover, a
majority of the Court of Appeal succeeds in situating the locus of the debate
where it belongs: in the midst of questions concerning the standards that should
govern the use of shareholder rights agreements.
Unfortunately, the Court of Appeal gets sidetracked when it comes to the
way in which it should approach the formulation of these standards. The Court
provides an unsatisfactory analysis of the fiduciary duties that govern the use of
a shareholder rights agreement, turning to policy statements instead of looking
first at how other jurisdictions have developed fiduciary standards to deal with
poison pills and then embarking on a creative extension of Canadian fiduciary
principles. Moreover, the majority ignores altogether the possibility that satis-
factory principles governing the fair treatment of shareholders might also be
found in a careful analysis of the oppression remedy. Instead of examining the
implications of the law regarding fiduciary duties and the oppression remedy for
the standards that should govern the use of poison pills, the Court reaches out
rather awkwardly to policy developed in a completely different setting, policy
which the courts simply have no mandate to apply.
In the end, we are left a long way from a well focused picture of the role
that poison pills should play in the acquisition process in Canada. There is of
course something to be said fortrial by error. But if a crisp picture of the stand-
ards governing the use of shareholder rights agreements is to emerge, then we
need to clarify thinking with respect to the distinctive roles and responsibilities
of institutions like the judiciary and securities commissions in ensuring that poi-
son pills are used constructively, as well as with respect to the range of princi-
ples that each institution may legitimately draw on in fashioning constraints on
the acquisition process. Only if we address these matters in a rigorous manner,
one that is sensitive to issues raised by the larger regulatory setting in which
corporate restructuring must unfold, can we hope to formulate business law that
will provide a stable context in which companies may set about meeting the
challenges that rapid economic changes continue to generate.
BOOK REVIEWS
CHRONIQUES BIBLIOGRAPHIQUES
G6rard Cornu, Linguistiquejuridique. Paris, Montchrestien, 1990. Pp. 412
[53,00$]. Comment par Nicole-Marie Fernbach*
<< [L]'6vidence s'impose que le temps des ouvrages de synth~se dans ce
domaine n'est pas encore arriv6. >> Ainsi s’exprimaient Jean-Louis Sourioux,
juriste, et Pierre Lerat, grammairien, dans la pr6face de leur ouvrage Le langage
du droit, paru en 1975′. Quinze ans plus tard, leur voeu aura Wt6 exauc6 puisque
G6rard Cornu leur oppose un d6menti formel avec la Linguistique juridique2. En
effet, cet ouvrage s’inscrit tout a fait dans la ligne des recherches annonc6es par
les deux auteurs, pionniers dans un domaine pluridisciplinaire qui, de l’aveu
m~me de G6rard Comu, << ne figure pas h la nomenclature des branches du
savoir >>’. Les juristes et les linguistes n’avaient, jusqu’h pr6sent, fait que des
recherches caract~re 6pars dans des domaines sp6cialis6s4, ce qui ne permettait
la mati~re de se structurer au niveau d’une science. Hormis certains
pas
ouvrages de lexicographie, les r6flexions d’ordre stylistique et phras6ologique,
si elles existaient d6j , n’avaient encore jamais fait l’objet d’une conception
aussi syst6matique et aussi large dans sa port6e, au point de constituer des
modules th6oriques5.
Certes, les auteurs du Langage du droit avaient pos6 les bases de la
recherche et montr6 la richesse pluridisciplinaire que produirait 1’exploration
* Licence 6s-lettres, Universit6 de Bordeaux ; licence en droit, Universit6 de Bordeaux ; LL.M.
en droit, Universit6 de Montr6al ; chargde de cours en droit et en traduction a l’Universit6 de Mont-
r6al ; consultante en jurilinguistique et traduction juridique.
Revue de droit de McGill
McGill Law Journal 1992
Mode de citation: (1992) 37 R.D. McGill 917
To be cited as: (1992) 37 McGill L.J. 917
1Paris, P.U.F., 1975
]a p. 11. Voir aussi des m~mes auteurs, < L'euph6misme dans la l6gislation
rdcente, D.1983.Chron.221.
2Paris, Montchrestien, 1990 [ci-apr~s Linguistique juridique].
31bid. A la p. 13.
4Voir les bibliographies et ouvrages cit6s dans la chronique bibliographique concemant, entre
autres, le Vocabulaire juridique, Paris, P.U.E, 1987 dans N.-M. Fembach, Compte rendu (1989)
34 R.D. McGill 368.
SL'ouvrage de M. Sparer et W. Schwab, Rddaction des lois : Rendez-vous du droit et de la cul-
ture, Qu6bec, Conseil de la langue frangaise, tditeur officiel du Quebec, 1980, est Ia seule synth~se
dans le domaine.
McGILL LAW JOURNAL
[Vol. 37
des rapports entre la langue et le droit. G6rard Cornu, quant h lui, s'6tait distin-
gu6 comme 6minent juriste et lexicologue, surtout grfice h son Vocabulaire jui-
dique6. II a, d'ailleurs, fait de nombreuses r~f6rences A son Vocabulaire juri-
dique dans la Linguistique juridique, ce qui indique que ses recherches en
lexicographie 6taient profond~ment imbriqu~es dans ses recherches d'ordre lin-
guistique, ces demi~res traduisant davantage un effort de synth~se. Si la phra-
s~ologie juridique et la stylistique n'6taient, jusqu'A pr6sent, que des parents
pauvres par rapport au vocabulaire, G6rard Cornu a maintenant corrig6 cette
lacune. II explique en introduction que la linguistique juridique comprend deux
volets. Le premier tome de son 6tude porte sur le langage du droit et, dans un
deuxi~me tome A venir, l'auteur annonce qu'il traitera du droit du langage, aussi
appel droit linguistique
.
La jurilinguistique, ou comme G6rard Cornu pr6f~re la nommer, la linguis-
tique juridique, poss~de maintenant son manuel th~orique, et nous nous propo-
sons d'examiner son contenu afin de mettre en 6vidence les aspects les plus
int6ressants pour le lecteur, qu'il soit juriste (ou apprenti juriste), linguiste (ou
apprenti linguiste) on, tout simplement, esprit curieux de science et d'6rudition.
Dans l'introduction, l'auteur pr6sente les d6finitions de base de la mati~re
6tudi6e. En particulier, il explique en quoi le langage juridique est un langage
de groupe, un langage technique et un langage traditionnel. II expose aussi les
caract~res plurifonctionnel et pluridimensionnel du langage du droit, notam-
ment dans ses diff6rents genres : le langage 16gislatif, le langage judiciaire, le
langage conventionnel (celui du contrat), le langage administratif et le langage
doctrinal. D'apr~s Comu, < [1]a linguistique juridique est l'application particu-
li~re au langage du droit de la science fondamentale de la linguistique g6n6-
rale >7. II explique en quoi il s’agit d’une science auxiliaire du droit qui com-
plate les autres sciences auxiliaires que sont l’histoire du droit, le droit compar6,
la sociologie et l’informatique juridique. Une fois la mati~re situee par rapport
aux autres branches du savoir
, il nous offre une bibliographie partiellement
annot6e et class6e de fagon th6matique, qui comporte des monographies et arti-
cles importants sur le frangais juridique et son style. M. Cornu ne se borne tou-
tefois pas A citer les auteurs de droit frangais. II pr6sente certains ouvrages des
jurilinguistes canadiens, en particulier de Jean-Claude G6mar et d’Emmanuel
Didier. La longue r6f6rence A Jeremy Bentham annonce l’analyse comparatiste
du discours l6gislatif en droit anglais qui se trouve dans la deuxi6me partie de
l’ouvrage. L’auteur propose enfin, comme support th6orique, des rudiments
documentaires de linguistique g6n6rale.
L’ouvrage, proprement dit, est divis6 en deux titres, le vocabulaire juri-
dique et le discours juridique. Le plan du premier titre est simple puisqu’il porte
sur les mots et les rapports entre les mots. On constate que, dans la mesure du
possible, l’auteur choisit de s’exprimer dans une langue courante ( mots
au
lieu de < termes
, par exemple). Le deuxi~me titre est consacr6 aux diff6rents
6Supra, note 4. Parmi les autres publications de G. Comu, citons : <(Les definitions dans la loi>
dans Milanges Vincent, Paris, Dalloz, 1981, 77; < La codification de ]a procedure civile en
France
(1986) 40 Revue juridique et politique : ind~pendance et cooperation 689.
7Linguistique juridique, supra, note 2 A la p. 31.
1992]
BOOK REVIEWS
discours, notamment le discours 16gislatif, le discours juridictionnel et le dis-
cours coutumier. L'ouvrage s'ach~ve sur une table des mati~res tr~s claire et
bien pr6sent6e sur le plan typographique. D~s le premier abord, le lecteur est
surpris par le caract~re 6rudit des r6f6rences et l'aspect exhaustif de la
recherche. Par ailleurs, l'auteur fait montre d'6motivit6, et ne cache pas sa pas-
sion pour la langue juridique. II s'exprime en apart6, dans les notes infrapagi-
nales, ce qui confure au texte un ton vivant et imag6 qui contraste avec la
parler
rigueur et la complexit6 de l'expos6. C'est ainsi qu'il n'h6site pas
d'amour ... du langage, pour ce qui est de la saveur du vocabulaire juridique s,
s'exclamer : < Amis du droit et de la langue, nous devrions ensemble les
ni
r6citer par coeur. Ah ! Si le droit europ6en nous confisquait ces tr6sors (6norme
propos des mots
aveu), je serais contre l'Europe ! >9 Ces accents vibrants
aboutissent h une profession de foi enthousiaste : A, ceux qui ont 6crit ces
mots, grace et salut ! Ils sauvent la loi. J’aime le droit pour lui-meme, et aussi
pour la justice et l’quit6. Je l’aime encore pour sa langue. 10
L’6tude de la linguistique juridique commence au titre premier par celle du
vocabulaire juridique. En linguistique, on distingue habituellement le lexique (le
vocabulaire), la syntaxe et le style d’6nonciation. L’auteur choisit, lui, de traiter
des particularit6s syntaxiques dans le titre portant sur le discours juridique mais
il s’avance un peu trop, cependant, lorsqu’il dit que le langage du droit ne pr6-
sente pas vraiment de sp6cificit6 syntaxique”. En fait, dans son analyse du dis-
cours 16gislatif, il signale des particularit6s syntaxiques comme l’61ision ou l’el-
lipse”. Raymondis et Le Guern, dans leur ouvrage Le langage de la justice
pinale3, ont analys6 non seulement les originalit6s lexicales mais encore les
originalit6s syntaxiques du langage de la justice p6nale et font une distinction
tr~s claire entre les termes originaux du lexique et la combinatoire sp6cialis~e
la tradition linguistique dans sa
des mots. G6rard Cornu revient davantage
typologie des termes juridiques puisqu’il distingue les mots en fonction de leur
appartenance exclusive au domaine juridique ou de leur double appartenance au
lexique g6n6ral et au vocabulaire sp6cialis6. Sur les 9 200 termes (mots et sous-
mots) recens6s par l’auteur du Vocabulaire juridique, il n’existerait pas plus de
400 termes exclusivement juridiques. Les autres seraient des polys6mes. II est,
la seule
par cons6quent, difficile d’attribuer le caract6re herm6tique du droit
technicit6 de son vocabulaire.
Ce noyau dur de la nomenclature exclusivement technique est bri~vement
pr6sent6 en colonnes, dans une disposition tr~s claire qui permet au lecteur d’en-
richir ses connaissances lexicales et de v6rifier les appartenances. La consulta-
tion est d’ailleurs facilit6e par l’ordre alphab6tique des listes de termes. Le clas-
sement par mati~re rev~t aussi un grand int6rt par rapport un dictionnaire ou
un lexique traditionnel, en particulier pour le lecteur 6tranger, car l’auteur pr6-
8lbid. aux pp. 71, 122.
91bid. A la p. 334.
‘0lbid.
“Ibid.
12Ibid. aux pp. 332-33.
13L.-M. Raymondis et M. Le Guem, Le langage de la justice pinale, Paris, tditions du CNRS,
la p. 135.
1976.
REVUE DE DROIT DE McGILL
[Vol. 37
sente un d6coupage en cat6gories qui est propre au droit frangais (langage de la
proc6dure, de la th6orie g6n6rale, du droit successoral, des contrats sp6ciaux,
des fraudes). Aucun terme latin ne figure dans les listes de mots car il s’agit
d’un groupe A part14 . Des termes 6trangers comme << ombudsman >> ou << estop-
pel >>5 sont lexicalis6s, c’est–dire consid6r6s comme franqais. Ces termes, pro-
prement techniques, n’ont pas pu entraner de d6rivation mais ils donnent sou-
vent lieu A une expression concurrente. En effet, la langue courante pr6f~re des
termes plus clairs et plus 6vocateurs. L’auteur explique que, m~me si l’on appre-
nait tous ces mots techniques, on n’apprendrait cependant pas le droit. L’ou-
vrage offre donc une grande richesse d’6rudition et permet d’acqu6rir des con-
naissances plus approfondies sur le vocabulaire du droit frangais, ce qui sera
d’un int6r~t particulier pour les civilistes qu6b6cois.
Apr~s les termes exclusivement juridiques, l’auteur pr6sente la cat6gorie
plus complexe de la double appartenance (les polys~mes), c’est-A-dire surtout
des termes qui << ont un sens juridique principal et un sens extrajuridique d6riv6
[...] >>. On apprend ainsi, par exemple, que le langage du droit a influ6 sur ]a
langue courante car certains termes sont entr6s dans la langue non sp6cialis6e
avec un sens juridique att6nu6 (par exemple, << l'affaire est dans le sac >>, en
tout 6tat de cause ,,, << s6ance tenante >> ou << sur-le-champ > ). L’auteur proc~de
alors A des classements typologiques d’un grand int6r~t th6orique qui permettent
de constater la d6rivation entre le langage du droit et la langue courante, avec
des faux amis comme << aliments ,, et << liquide ,,. Cette 6tude des termes le con-
duit i poser les probl~mes de la clart6 et de la lisibilit6 pour les non-initi6s. Si
les termes de technique juridique, proprement dits, ne sont pas assez 6vocateurs
et sont donc incompris du grand public, ceux qui ont des sens concurrents, par-
fois oppos6s dans la langue du droit et dans la langue courante, font davantage
6cran.
L'auteur se livre aussi A une longue analyse de la polys6mie (interne et
externe) 7 , en tant que source de confusion, et il se lance alors dans le d~bat de
la lisibilit6 sans toutefois y faire nomm6ment r6f6rence18 . I1 oppose les theses en
pr6sence, A savoir celle (utopique, selon lui) de M. Becquart19 selon lequel il
faudrait exclure les termes du 'vocabulaire courant dans la d6signation des
la p. 65.
14Linguistique juridique, supra, note 2
'5Sur ce point, voir les remarques sur ]a traduction du mot << estoppel >> par << preclusion > dans
M. Bastarache et D.G. Reed, o La n~cessit6 d’un vocabulaire frangais pour la Common law >> dans
J.-C. G6mar, 6d., Langage du droit et traduction, Montr6al, Linguatech, 1982, 207 a la p. 213 et
s. L’usage differe au Nouveau-Brunswick, comme en t6moignent les traductions donn~es pour les
expressions compos6es d’<< estoppel >>.
‘6Linguistique juridique, supra, note 2 A la p. 69.
17Polys6mie interne: le terme a plusieurs sens en droit. Polys6mie extere : le terme a un sens
en droit et un autre sens courant.
18Linguistiquejuridique, supra, note 2 A lap. 85. Sur la question de la lisibilit6 et du < Plain Lan-
guage Movement >>, voir N.-M. Ferbach, La lisibilitj dans la rddaction juridique au Qudbec,
Ottawa, Centre canadien d’information juridique, 1990.
“gLes mots ei sens multiples dans le droit civil frangais : Contribution au perfectionneinent du
vocabulairejuridique, Paris, P.U.E, 1928. Par exemple, dans I’optique de l’auteur, selon G. Cornu,
au lieu de << prescription acquisitive >>, on dirait << usucapion >> (Linguistiquejuridique, ibid. A la p.
86).
1992]
CHRONIQUES BIBLIOGRAPHIQUES
notions juridiques,’ et celle des tenants de la lisibilit6 qui voudraient remplacer
la terminologie technique du droit, dans la mesure du possible, par des 6quiva-
lents de langue courante.
L’auteur propose d’arbitrer ce diff6rend entre les deux 6coles de pens6e par
une analyse approfondie des cons6quences de chaque choix. << [I]l est impos-
sible d'amputer le vocabulaire juridique non seulement, comme il est 6vident,
des termes qui conservent leur. sens dans le langage juridique, mais aussi [...] de
ceux dont le sens juridique est une application sp6cifique d'un sens g6n6-
rique >20. L’auteur se demande alors : comment se passerait-on de polys~mes
comme cause, motif, mati~re, substance, objet, condition, etc. >>21 ? Aux tenants
de la simplification du langage sp6cialis6, il r6pondra, notamment
propos de
la version plus lisible >> de la loi frangaise sur le divorce, qu’< il est ridicule
d'avoir chass6 les termes demandeur, d6fendeur, demande reconventionnelle
pour de maladroites p6riphrases. La d6magogie est mauvaise conseill~re. Les
d6finitions l6gales sont IM, quand il le faut, pour livrer le sens du terme tech-
nique. 22
G&ard Cornu formule aussi sa th6orie de la simplification du langage juri-
dique, en ce qui concerne le vocabulaire. I1 faut remplacer le terme polys~me
qui cr6e de la confusion, quand il a un sens diff6rent en droit et dans la langue
courante, par un terme de la langue courante qui serait plus clair et plus com-
, ce terme devant 8tre aussi sp6cifique que l'ancien (faute de
prehensible
quoi, il y aurait globalement progr~s r6c6ssif [sic]) >>’. En fait, pour G6rard
Comu,
la technicit6 du langage du droit est une exigence irr~ductible de la fonction
sociale du droit [… et …] la querelle du langage technique, oppos6 au langage cou-
rant, est un probIne mal pos6. D’abord parce que le langage ordinaire n’est pas
une alternative du langage juridique. […] Ensuite parce que le proc~s du langage
technique […] est surtout celui de l’archaYsme auquel la technicit6 n’est pas n~ces-
sairement lie […]24.
La question des archaYsmes est trait~e de la mani~re suivante : << Tout ce
qui est archaique est ancien, mais tout ce qui est ancien n'est pas archa'ique. 0
la p. 85.
2Linguistique juridique, ibid.
21Ibid.
22Ibid. A la p. 323. Il s'agit plus prdcis6ment du texte de la loi adopt6e par le Parlement frangais
le 30 juin 1975, suite a une r6vision de la version originale jugde moins claire (Loi n' 75-617 du
11 juillet 1975, J.O., 12 juillet 1975, 7171). Voir sur ce point L. Foug~re, La modernisation du
langage juridique > dans Etudes et documents, Paris, Conseil d’Etat, 1984-85, 121 a Ia p. 122 et
S.
23Linguistique juridique, supra, note 2 a la p. 87. Ainsi, dans son nouveau Code de procddure
par ‘ acte
civile (de France), il a remplac6 exp6dition> par copie o, exploit d’huissier
d’huissier >, distraction des d6pens par < recouvrement direct
.
241bid. h Ia p. 25.
25Ibid. Le mouvement pour Ia simplification de la langue juridique en France s'est traduit par
la r6glementation de l'usage officiel. Voir, a cet 6gard, la circulaire du 15 septembre 1977 relative
au vocabulaire judiciaire qui propose une traduction normalis~e des expressions latines courantes
et des termes de remplacement pour les archaismes et locutions surann~es, les locutions inutiles
ou creuses et les expressions peu intelligibles ou ambiguas (J.O., 24 septembre 1977 (N.C.), 6077).
D'autres circulaires sont parues au Journal officiel en 1974, 1976, et 1979 sur ces m~mes th~mes.
McGILL LAW JOURNAL
[Vol. 37
L'archa'sme existe lorsque le juriste d6signe des choses courantes par des
termes anciens et d6suets comme le sieur >,
la dame >>, il appert >, au
pied d’icelle >> –
des termes qui gagneraient h 6tre remplac6s par l’6quivalent
courant. Toutefois, des termes anciens pr6cis qui n’ont pas d’6quivalent courant
comme < emphyt~ose >>, antichr~se ,>, anatocisme > , hoirie > demeurent
valables. Pour M. Cornu, le langage du droit n’est pas fig6 mais dynamique,
(par exemple, puissance paternelle o se dit aujourd’hui autorit6 parentale >>
et prestation compensatoire o est devenu < pension alimentaire ). Le droit
renouvelle aussi son stock lexical par la formation de mots compos6s, < la
source principale des n6ologismes du l6gislateur >>, par exemple, communaut6
de vie >>, r6gime de protection >>, assistance 6ducative o6.
Les rapports entre les mots s’6tudient d’abord de mot h mot et selon les
families de mots. L’analyse propos6e rev~t beaucoup d’int6rat linguistique car
l’auteur expose les notions fondamentales d’6tymologie et pr6sente des listes de
termes et notions inspir6s du latin, du grec, de l’italien et d’autres sources dans
le vocabulaire du droit frangais. I1 traite aussi des probl~mes pos6s par les
homonymes27, surtout s’ils sont homonymes parfaits, c’est- -dire i la fois
homographes et homophones, et des synonymes dans leur rapport d’analogie
.
II se livre i une int6ressante opposition entre les mots dans leur rapport d’an-
tonymie29. La classification faite par Sourioux et Lerat suivait d6j ce d6coupage
et les auteurs avaient montr6 comment le langage du droit fabriquait ses propres
termes A base de pr6fixes et de suffixes, parfois par la substantivation h partir
de participes et d’adjectifs”. G6rard Cornu analyse la d6rivation de la meme
mani~re et propose des listes de vocabulaire plus fournies”.
L’avantage de cette pr6sentation structur6e du vocabulaire, avec ses
regroupements par cat6gories, est 6vident pour l’apprenti linguiste ou l’apprenti
juriste qui cherche h enrichir son vocabulaire ou A mieux comprendre le syst~me
de cr6ation n6ologique. Tr~s souvent, l’apprentissage de la langue de sp6cialit6
se fait de mani~re empirique, au coup par coup, c’est-i-dire
coups de diction-
naire. Or, le dictionnaire pr6sente les termes par ordre alphab6tique et il ne
donne que tr~s rarement des notions connexes ou des renvois de synonymie ou
d’antonymie32. Le lecteur a donc beaucoup de difficult6 A voir la valeur relative
des termes. D’une consultation facile, les listes de termes sont ici clairement
d6marqu6es. Nous aurions toutefois souhait6 qu’il y ait un index de terminolo-
gie, au moins, car dans cette perspective de consultation, le lecteur aurait 6t6
dispens6 de parcourir tout le chapitre pour v6rifier un terme.
Dans le titre deuxi~me, le discours juridique est analys6 davantage sous
l’angle de la phras6ologie que de la terminologie. G6rard Cornu fait alors
26Linguistique juridique, ibid. aux pp. 110-11.
27Ibid. A la p. 137 et s.
2Ibid. a ]a p. 176 et s.
2 91bid. A la p. 180 et s.
30Supra, note 1 A la p. 17 et s.
3 Linguistique juridique, supra, note 2
32Le Dictionnaire de droit privg et Lexiques bilingues de P.-A. Cr~peau, 6d., 2e 6d., Montrdal,
Centre de recherche en droit priv et compar6 du Quebec, 1991, constitue une exception t cet 6gard
car il renseigne davantage le lecteur sur les contextes et il proc~de par renvoi.
la p. 157 et s.
1992]
BOOK REVIEWS
oeuvre originale et pluridisciplinaire car il int~gre des notions de communica-
tion modemes, comme le module de Roman Jakobson33 . II manifeste son int6rt
pour la notion de communication r6ussie qu’il r6sume ainsi : le r6cepteur, une
fois le contact 6tabli, [… doit connaitre] le code qu’utilise l’6metteur […] et […]
laquelle r6f6rent [sic] les signes de l’6nonc6 >>4. I1 envisage d~s lors
la rdalit6
toutes les situations de communication, que ce soit entre initi6s ou d’initi6s A
non-initi6s, ou vice-versa.
. II examine, tour
S’inspirant du module de la communication, l’auteur pr6sente d’abord les
diff6rents cas d’61aboration d’un discours juridique, dans un chapitre pr6limi-
naire intitul6 Typologie g6n6rale
tour, les sujets du dis-
cours, les types de message et les modes d’expression. C’est une veritable typo-
logie des messages juridiques qui nous est propos6e, de fagon syst6matique,
avec les conditions particuli~res
chaque contexte. Chaque situation est diss6-
qu6e de fagon montrer les contraintes que subit l’6metteur du message et les
conditions de r6ception, selon que le message est destin6 une personne d6ter-
min6e (acte r6ceptice), un groupe d~termin6 (acte d’audience) ou A tout enten-
deur (la loi). L’auteur prend d6lib6r6ment parti d’embl6e pour la lisibilit6 des
messages. D’apr~s lui, la clart6 devrait 6tre souveraine, surtout dans la commu-
nication avec les non-initi6s. I1 avait d’ailleurs pos6 en introduction son inter-
pr6tation de la maxime Nul n’est cens6 ignorer la loi >> A savoir < une directive
et lui fait obligation d'6tre clair s.
[qui] se retoume contre l'auteur du message
Celui-ci aurait le devoir d'6tre clair.
D'ailleurs, G6rard Comu ne souhaite pas seulement que la clart6 s'impose
dans les communications avec les non-initi6s. I1 recommande aussi aux initi6s,
entre eux, d'am6liorer leurs connaissances linguistiques pour communiquer en
faisant usage de toutes les ressources de la langue frangaise. La comparaison de
1'6crit et de l'oral dans la communication juridique le conduit A constater la pr6-
dominance du style oral dans 1'6crit, surtout comme en attestent les tropes,
c'est- -dire les figures de rh6torique. II donne une longue bibliographie sur cette
discipline et, en cela, il se rapproche des r6cents 6crits anglo-am~ricains sur la
linguistique juridique3".
Cet expos6 d6bouche naturellement sur l'analyse phras~ologique du dis-
cours l6gislatif. De tous les styles, le style des lois est sans doute celui qui a le
plus retenu l'attention des juristes et des jurilinguistes, en particulier en droit
qu6b6cois et en droit f6d6ral canadien37. Grard Comu avait d6jA contribu6
la
r6flexion th~orique canadienne en 1982, dans le collectif Langage du droit et
traduction, oa il avait trait6 de la question des d6finitions 38 . La loi en tant que
norme se reconnait, selon G6rard Cornu, A des marques fonctionnelles comme
l'emploi de certains verbes et autres conventions de langage. Le lecteur cana-
33Voir Linguistique juridique, supra, note 2 a la p. 212.
31bid.
35Ibid. A la p. 29.
361bid. a la p. 260 n. 65. Voir aussi, notamment, B. A. Garner, The Elements of Legal Style,
Oxford, Oxford U. Press, 1991, qui insiste sur les aspects rhdtoriques du droit.
37Voir, par exemple, Sparer et Schwab, supra, note 5.
38< Les d6finitions dans la loi > dans G6mar, 6d., supra, note 15, 15.
REVUE DE DROIT DE McGILL
[Vol. 37
dien retrouvera avec plaisir bon nombre des conventions de style 16gislatif –
et juridique en g6n6ral –
qui ont 6t6 adopt6es, au fil des ann6es, dans un souci
de francisation des lois39. L’int&& de la presentation faite par G6rard Cornu
tient au fait qu’il raisonne dans une perspective stylistique exclusivement fran-
gaise, sans pr6occupation de droit compar6. Il 6num&re les verbes explicites qui
caract6risent la loi en tant que norme, les diff6rentes tournures en usage dans les
lois frangaises, qu’elles soient civiles ou p6nales, et un long d6veloppement est
consacr6 h l’emploi de l’indicatif pr6sent. Ce dernier aspect retiendra particuli6-
rement l’attention des traducteurs juridiques qui ont sans cesse
se justifier
quand ils utilisent cette forme verbale, au lieu du futur, par exemple. L’auteur
explique les r~gles d’utilisation du futur et de l’imp6ratif. En r6sum6, l’indicatif
pr6sent exprime le devoir parce que l’expression la loi dispose que [..]>> est
sous-entendueo.
Sur le plan formel et structurel de la loi, l’auteur fait r6f6rence pr6cis6ment
au Guide de ridaction ligislative4′ qu’il vient appuyer. La lecture de ce chapitre
permettra aux r~dacteurs de langue frangaise, l6gistes et autres, d’adapter les
r~gles et principes
i leur contexte, notamment pour les lois qu6b6coises, onta-
riennes, n6o-brunswickoises, manitobaines et f6d6rales canadiennes. Le fait que
G6rard Comu puise abondamment dans les 6crits de Jeremy Bentham pour ce
qui est de la bonne r6daction l6gislative est d’ailleurs encourageant pour les
comparatistes canadiens. On constate que la logique de la r6daction lisible est
supralinguistique, pour ne pas dire m6talinguistique. Les principes propos6s par
le jurisconsulte anglais sont analys6s et int6gr6s par l’auteur qui en admire visi-
blement les qualit6s et l’efficacit6 du point de vue de la proc6dure d’assembl6e
l6gislative. Bentham s’inscrit dans le mouvement pour la lisibilit6 des lois et
m6me, plus pr6cis6ment, parmi les quantitativistes A cet 6gard puisqu’il fixe des
normes chiffr6es pour la longueur des articles.
G6rard Cornu propose diverses solutions en vue de m6nager la coh6sion
des lois, de les simplifier et de les normaliser, notamment par les canons. I1
r6sume sa position en mati~re de lisibilit6 des lois de la fagon suivante :
1. Chaque fois qu’il est possible, le 16gislateur doit s’exprimer de mani~re A 6tre
compris de tous. Nul n’est cens6 ignorer la loi. 2. Chaque fois qu’il est n6cessaire,
le ldgislateur doit utiliser la prdcision de son langage technique. C’est aussi une
garantie de clart, de s6curit6 et de libert642.
Le discours juridictionnel fait r6f6rence au style judiciaire, lequel a fait
l’objet de moins d’efforts au plan th6orique, tant en France qu’au Canada, par
la recherche en 16gistique. G6rard Cornu se r6f~re A la tradition pos6e
rapport
en France par Pierre Mimin43 et suivie par Frangois-Michel Schroeder 44. Le
tion g6n6rale des affaires 16gislatives, 1984.
39Guide canadien de redaction lgislative frangaise, Ottawa, Minist~re de ]a Justice, 1991.
40Linguistique juridique, supra, note 2 i la p. 272.
41R. Tremblay, R. Joumeault-Turgeon et J. Lagacd, Qu6bec, Gouvemement du Qu6bec, Direc-
42Linguistiquejuridique, supra, note 2 A la p. 319. Voir aussi M. Sparer et W. Schwab, ” Loi
43Le style des jugements, 4e 6d., Paris, Librairies techniques, 1978.
44Le nouveau style judiciaire, Paris, Dalloz, 1978.
et h6ritage culturel >> (1979) 20 C. de D. 399.
1992]
CHRONIQUES BIBLIOGRAPHIQUES
juriste constatera le caract~re formaliste des jugements frangais et un certain
souci de normalisation et de coh6rence dans le style jurisprudentiel. Pourtant,
G6rard Cornu nuance son expos6 en disant qu’il existe certaines particularit6s
chaque juridiction. II s’attache donc A montrer ce que les juridictions
propres
ont en commun et, en quoi, par exemple, les d6cisions du Conseil d’ttat cons-
tituent un genre particulier’
.
Les conventions de langage mises en 6vidence rev~tent un int6ret certain
pour le lecteur canadien, une fois encore parce que toutes les formulations sont
extraites de textes r6dig6s en frangais, sans r6f6rence A un droit diff6rent. L’au-
teur ne mentionne pas, d’ailleurs, le style judiciaire anglais, comme si la valeur
radicalement diff6rente des pr6c6dents et du r6le du juge rendait la consultation
des textes anglais moins utile. L’information contenue dans le chapitre est tout
A fait originale car elle est l’oeuvre d’une synth~se, et la trame logique de la
d6cision judiciaire frangaise est diss~qu6e de fagon tr~s profitable pour le non-
initi646.
L’ouvrage se termine sur l’analyse du discours coutumier, plus pr6cis6ment
des maximes et adages du droit. L’int6r~t de ce chapitre est manifeste pour le
juriste, quelle que soit sa langue, et qu’il soit de droit civil ou de common law.
G6rard Cornu ram~ne A la source du droit europ6en, ce qu’il appelle le << tr6sor
des adages >>”. Il se r6frre h la recherche d6jA publi6e par Henri Roland et Lau-
rent Boyer en la mati~re’. On apprend que le lot le plus important d’adages pro-
vient du droit romain et donc du latin mais que nombre d’adages sont aussi du
vieux frangais, plus pr6cis6ment du droit coutumier. L’auteur en donne une des-
cription historique jusqu’A nos jours et montre que c’est surtout la doctrine qui
en est friande.
Certains adages sont << porteurs de rdgles techniques, de principes ginj-
raux, de directives d'interpritation ou d'explications fondamentales >>49. L’au-
teur pr6sente de longues 6num6rations en forme de typologie selon les fonctions
de l’adage (6noncer le droit, soutenir le droit). L’adage aura plus ou moins de
valeur selon qu’il correspond au droit applicable ou s’en 6carte. Ses marques
stylistiques essentielles, comme la concision ou la valeur litt6raire, voire po6-
tique, en font un objet d’6tude linguistique. L’analyse de son style raccourci,
elliptique int6ressera les lecteurs, surtout lorsqu’il s’agit de comparer et d’inter-
pr6ter des formulations semblables en droit anglais ou am6ricain. L’auteur ne
fournit pas de traduction pour les adages latins, ce qui produit donc un r6pertoire
des maximes.
45Linguistique juridique, supra, note 2
46pour une 6tude comparative, voir G. Fauteux, Le livre du magistrat, Ottawa, Approvisionne-
ments et services Canada, 1980. Voir aussi P. Robitaille, < Le style des jugements > (1979) 39 R.
du B. 222.
47Au Qu6bec, le juge A. Mayrand avait fait oeuvre originale avec son ouvrage Dictionnaire de
la p. 337.
maxines et locutions latines utilisdes en droit, Cowansville, Qu6., Yvon Blais, 1985.
48Locutions latines et adages du droit frangais contemporain, deux tomes, Lyon, L’Herm~s,
1978. Voir aussi des m~mes auteurs, Dictionnaire des expressions juridiques, Lyon, L’Herm~s,
1983 et Expressions latines du droit frangais, 2e 6d., Lyon, L’Herm~s, 1985.
49Linguistique juridique, supra, note 2 A la p. 369.
McGILL LAW JOURNAL
[Vol. 37
Comme nous avons pu le constater, l’intrt, la fois throrique et pratique
de cet ouvrage, ne fait pas de doute et il faut s’attendre A ce qu’il devienne un
classique du genre. Force nous est cependant de constater certaines faiblesses
qui ont 6t6 6voqures au fur et h mesure des commentaires. Ces faiblesses
tiennent essentiellement
la forme du texte.
Tout d’abord, la bibliographie fournie n’est pas assez complete et exhaus-
tive, compte tenu des besoins des lecteurs. La documentation juridique frangaise
en la mati~re 6tant rare et difficile d’acc6s, l’diteur aurait eu un moyen privi-
16gi6 de diffuser davantage les 6crits frangais sur le domaine. La pr6sentation de
la bibliographie n’est pas assez rigoureuse, compte tenu des conventions de pr6-
sentation normalisres, et de nombreuses fautes d’impression s’y sont gliss6es.
Enfin, elle n’est pas placre de fagon conventionnelle puisqu’elle se trouve apr~s
l’introduction, ce qui gene la consultation.
Quant au plan du texte, s’il est simple et clair, il aurait dfi 6tre retravaill6
pour 6viter les rrprtitions entre les chapitres, ce qui aurait permis d’6puiser cer-
tains themes communs. Le plan suivi est int6ressant, mais il ne permet pas de
regrouper les r6flexions sur les m~mes sujets, par exemple, la question de l’ar-
cha’isme ou le probl~me grnral de la simplification du langage.
Enfin, le plan n’est pas exhaustif en ce sens que des aspects importants,
comme le style des contrats, le style administratif et la comparaison avec le style
juridique, en g6ndral, et le style de la doctrine auraient m6rit6 davantage d’at-
tention. Le lecteur s’attend voir traiter la mati~re de fagon exhaustive car il n’a
pratiquement pas d’autre ouvrage de synth~se A sa disposition. Dans une pro-
chaine 6dition, cet aspect pourrait 6tre approfondi par l’auteur.
Que ces commentaires critiques n’assombrissent cependant pas l’impres-
sion, par ailleurs tr~s favorable, que devrait laisser l’ouvrage. Cette juxtaposi-
tion brillante d’6rudition et de simplicit6 confrre au texte une grande valeur
didactique 0 .
L’auteur laisse aussi facilement percer son gofit pour la po6sie et prouve
combien elle peut faire bon m6nage avec le droit et la dignit6 de ses magistrats.
Ce penchant litt6raire trouvera certainement un 6cho au Quebec qui a aussi ses
juristes-po~tes comme en t6moigne ce jugement de la Cour provinciale rendu
par M. le juge Jacques Page:
La preuve devant la Cour fiat breve et sans 6clat
Des gestes de l’accus6, l’agent en fit 6tat.
Et ainsi drcrivant d’un p~cheur hasardeux
Pr~s d’un ruisseau tranquille, les agirs scandaleux.
<< II scruta de ces ondes la bouche d'une 6puisette >>
Mais des nombreuses perchaudes j’ignore le drcompte net >
< Et plusieurs fois je vis cet outil dangereux >>
v Fouiller en profondeur les eaux calmes de ces lieux. >>
En vain l’oeil attentif chercha les r~glements
Qui devaient prohiber ces gestes si frequents.
50L’ouvrage aurait gagn6 en int6rat didactique si l’auteur avait davantage montr6 en quoi les pou-
voirs publics frangais se sont distingurs par leur souci de lisibilit.
1992]
BOOK REVIEWS
La Cour scrutant la Ioi chercha la r~gle 6crite;
La Couronne fit de meme car c’6tait sa poursuite
Mais constata enfin que rien dans toutes les lois
Ne justiflait soudain l’assaut d’un tel 6moi.
Pour ces motifs la Cour, de l’acte reproch6
A. d6faut d’interdit, acquitte l’accus 51.
51R. c. Mailhot (8 mai 1979), Sherbrooke 450-27-003851-78 (C.P.).
