LITIGATION & DISPUTE RESOLUTION: An Introduction to British Columbia
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British Columbia – Litigation – General Commercial
In British Columbia (B.C.), commercial litigators and the courts in which they practice are continuing to adjust to the reality of living with the COVID-19 pandemic after almost two years of doing so. In September 2021, B.C. instituted a mandatory vaccine “passport” system (affecting access to non-essential services, including restaurants, gyms, cinemas, and indoor sporting events), as well as a mask mandate. In response to certain individuals’ pushback on this, the public health authorities have successfully obtained court injunctions to ensure compliance with these orders. As well, many private and public employers have instituted vaccine requirements for continued employment.
In B.C. commercial litigation takes place primarily in the superior courts, the Supreme Court (the trial court) (BCSC) and Court of Appeal (with further appeals to the Supreme Court of Canada (SCC) located in Canada’s capital, Ottawa). (The jurisdiction of the B.C. Provincial Court is currently capped at claims under CAD35,000). A Justice (or Master) of the BCSC hears procedural matters by application; as a result of the pandemic, the BCSC now accepts applications by telephone and video. Unlike some other provinces, however, the B.C. courts have resumed in-person hearings at the BCCA and trials at the BCSC. Following the public health orders, all persons attending courthouses in B.C. are required to wear a face mask (with a few exceptions) and the number of people in a courtroom has been restricted.
B.C. also suffered a series of unprecedented extreme weather events in the past six months, including record high temperatures (a Canadian city reached 49° Celsius) expansive forest fires, and landslides and flooding. This has caused extensive damage to infrastructure (roads and railways), adversely affecting supply chains across the country, which is expected to last many months, in addition to severe economic and personal suffering. The effects of these events will certainly result in litigation in the ensuing months and years.
That said, in this overview, we have focused on one highly publicised BCSC case, which, as opposed to a natural disaster, has at its core a familial narrative not unlike the hit show “Succession”. In November 2021, the BCSC quickly resolved the dispute regarding the removal and replacement of directors of one of Canada’s largest public telecommunications and media companies, Rogers Communications Inc. (RCI). RCI was incorporated in 1987 under B.C. law and is controlled by the Rogers Control Trust (RCT), a family trust established for that purpose. The provisions of the Business Corporations Act (S.B.C. 2002, c. 57) (the BCBCA) concerning the removal and replacement of directors are unique in Canada and were considered in the case, reported as Edward Rogers v. Rogers Communications Inc., 2021 BCSC 2184. The BCBCA permits a company flexibility in tailoring its articles in any manner it chooses and the BCSC concluded that the interaction of the RCI Articles and the statutory provisions permitted Edward Rogers, the son of RCI’s founder Ted Rogers, to remove and replace five of RCI’s board members through a consent resolution he had initiated as the chair of the RCT, RCI’s largest shareholder. Edward Rogers has acted as the Chair of the RCT since Ted’s death in 2008.
RCI has a dual class share structure, comprised of voting (Class A) and non-voting (Class B) shares, which are publicly traded. The RCT is the controlling shareholder of RCI, beneficially owning 97.5% of the issued and outstanding Class A shares and approximately 10% of the outstanding Class B shares of RCI (either directly or through Rogers-family owned companies). In early 2021, RCI announced it would be acquiring one of its competitors, Shaw Communications Inc., for approximately CAD26 billion; the deal is scheduled to close in 2022, subject to regulatory approval.
The internal power struggle between Edward and his family members (his mother and two of his three sisters) erupted in October 2021 and captured the attention of the Canadian media and public, as well as stock markets. The judge described the Rogers family squabbles as “an interesting backdrop to this dispute that would be more in keeping with a Shakespearean drama,” adding a voyeuristic element into the lives of a very wealthy Canadian family.
In light of RCI’s acquisition of Shaw, Edward grew concerned about RCI’s CEO and sought to replace him with RCI’s CFO. The RCI board voted 10-1 in favour of a resolution to accept the CEO’s resignation. However, at a meeting held two days later, one of Edward’s sisters and another board director proposed a new resolution rescinding those resolutions. Voting on this resolution was postponed and machinations ensued. By mid-October, Edward formed the view that at least five of the RCI directors (the independent directors) were ignoring RCT’s views as RCI’s largest shareholder, making the situation untenable. On October 21, 2021, at the RCT Advisory Committee (RCAT) meeting, Edward announced his intention as RCT Chair to remove and replace the independent directors, which the members of the RCAT approved, except for Edward’s mother and two of his sisters. That same day, a consent resolution effecting the removal and replacement of the independent directors was sent to the registered shareholders of RCI’s Class A shares. The consent resolution was executed by a majority of these shareholders and was valid and effective as of October 22, 2021.
The independent directors, Edward’s mother and two of his sisters challenged the validity of the consent resolution and the “public war of words between the two factions” began. The RCI faction argued that the RCI Articles require a “meeting” of shareholders to remove and replace directors, whereas Edward’s faction argued that the consent resolution process was valid. The case was decided on the interpretation of the RCI Articles and the BCBCA provisions. Justice Fitzpatrick concluded that the clear import of both the RCI Articles and the BCBCA is “the intention that they dovetail with each other and that they be read and applied in harmonious fashion.” She found that nothing in the BCBCA supported the interpretation that a “meeting” can only mean “an actual meeting of the shareholders” and that the process of a consent resolution approved by a majority of the shareholders was valid and effective. Under the BCBCA, the process of a consent resolution can be deemed as valid and effective as if passed at a meeting (signalling that the process is intended to obviate the need for a meeting at all).
Earlier in 2021, the SCC released Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7 (Wastech), a B.C. case arising from a domestic arbitration involving parties to a complex, long-term waste disposal contract. In Wastech, the SCC expounded further on what it has termed the “organising principle” of good faith, focusing on the duty to exercise a contractual discretion in good faith. The SCC confirmed that the duty to exercise contractual discretion in good faith requires parties to exercise the discretion reasonably, which means in a manner consistent with the purposes for which it was granted. Exercising this discretion capriciously or arbitrarily in light of its purpose is wrongful and constitutes a breach of contract.