By Julius Melnitzer | January 23, 2024
What follows is Part II of Law360 Canada’s annual list of the country’s Top 10 business decisions ranking cases 1-5 in ascending order. Part I, which ranked cases 6-10, was published earlier.
These sister cases represent the Ontario Court of Appeal’s first attempt at explaining the notion of “material change” in the context of the Ontario Securities Act’s timely disclosure requirements. The legislation defines such a change as “a change in the business, operations or capital of the issuer that would reasonably be expected to have a significant effect on the market price or value” of the issuer’s securities.
The court articulated a two-step analysis in determining whether a material change occurred.
Initially, the court must consider whether the issuer experienced a “change,” broadly defined, that affected its business, operations or capital, again broadly defined and including a change in risk to these elements. The second question is whether the change could reasonably be expected to have a significant effect on the market price of the issuer’s securities.
“The upshot is that external circumstances that affect the issuer’s share price but do not affect its business, operations or capital do not qualify as a ‘change’,” said Craig Lockwood, a litigation partner in Osler, Hoskin & Harcourt LLP’s Toronto office. “But also central to the analysis is an appreciation that the first step does not involve an assessment of the change’s magnitude or materiality, whereas the second step does.”
The court’s affirmation, however, that the meaning of “change” is fact-specific and that there is no bright-line test for what constitutes a “change”, can be problematic.
“That’s especially true when trying to distinguish between a ‘material fact’ which must be disclosed in certain documents, like a prospectus, and a ‘material change’, which relates only to timely disclosure,” Lockwood said.
APPEARANCES: Groia & Company; Cassels Brock & Blackwell LLP; Strosberg Sasso Sutts LLP; Stikeman Elliott LLP
4. R. v. Greater Sudbury (City) (SCC)
In holding that an owner whose direct employees (as opposed to third party contractors, an entirely different issue) are present at a workplace and perform work there are “employers” who have responsibilities and liabilities under Ontario’s Occupational Health and Safety Act whether or not the owner had hired a “constructor” (think “general contractor”) for the project, the SCC has significantly expanded project owners’ risk. The ruling means that owners do not necessarily need to have control over their contractors’ workers to attract liability for safety violations under the statute.
“The case has owners in a tizzy over how to manage their projects going forward because it says they may attract employer duties simply by sending their people to the site even when they have hired a general contractor to manage a project,” said Cheryl Edwards, a partner in the Toronto office of national labour and employment boutique Mathews, Dinsdale & Clark LLP. “It’s really brought to light the need for organizations to understand the complexity of the OHSA and create detailed management systems to deal with it.”
APPEARANCES: Stringer LLP; Ministry of Attorney General (ON); Norton Rose Fulbright Canada LLP; Lax O’Sullivan Lisus Gottlieb; WorkSafeBC
The Supreme Court of Canada’s ruling that Quebec’s Financial Markets Administrative Tribunal had jurisdiction over four British Columbia residents accused of contravening Quebec’s Securities Act is a landmark decision on the territorial jurisdiction of administrative tribunals.
“Sharp provides a clear framework for assessing the jurisdiction of administrative tribunals generally and will have broad implications that go well beyond the securities arena,” said Simon Seida, a commercial litigation partner in Blake, Cassels & Graydon LLP’s Montreal office. “And I don’t see any reason why it wouldn’t apply to regulators in other provinces who assert claims against non-residents.”
APPEARANCES: Langlois Lawyers, LLP; Autorité des marchés financiers; Attorney-General of Quebec; Ontario Securities Commission
The SCC’s ruling that major portions of the federal Impact Assessment Act were unconstitutional as infringing on the constitutional division of powers undoubtedly came as a great relief to the provinces, and Alberta in particular.
“The decision is a major one in the 30-year saga of cases in which the Supreme Court has been asked to examine the constitutional division of powers as they relate to the environment, and it is one where the court exercised a bit more restraint over the federal jurisdiction,” said Matti Lemmens, a Calgary partner in Stikeman Elliott LLP’s corporate litigation group. “It’s now clear that Ottawa does not have carte blanche over regulation of the environment and that the federal exercise of that power must be tied to impacts within the federal jurisdiction.”
The IAA, which stipulates when and how resource projects are subject to federal environmental impact assessments, replaced the Canadian Environmental Assessment Act 2012. As the majority in the SCC saw it, however, the Act’s core provisions, which gave the feds authority to designate projects as subject to the legislation, did not sufficiently tether the federal government’s powers to matters within federal jurisdiction. The portions of the Act dealing with projects on federal land or land outside Canada were, however, properly within federal jurisdiction.
APPEARANCES: Justice Canada; Bennett Jones LLP; Ministry of Attorney General (ON); Department of Justice (QC); Government of New Brunswick, Constitutional Law Group; Attorney General of Manitoba; Ministry of the Attorney General (BC); Saskatchewan Ministry of Justice and Attorney General; Government of Newfoundland and Labrador; Rae and Company; Maurice Law; Martin Olszynski; West Coast Environmental Law; Burnet, Duckworth & Palmer, LLP; Crease Harman LLP; Woodward & Company LLP; Osler, Hoskin & Harcourt LLP; Ecojustice; Alberta Counsel; JFK Law LLP; McCarthy Tétrault LLP; Borden Ladner Gervais LLP; Gall Legge Grant Zwack LLP; Sharon Mascher; Arvay Finlay LLP; Canadian Environmental Law Association; FNMPC Advisory Centre; DHC Avocats; Quebec Environmental Law Centre; DGW Law Corporation
The FCA affirmation of the Competition Tribunal’s approval of this $26 billion merger, the largest in the telecom industry’s Canadian history, earns the top ranking for 2023 for the combination of its business and legal impacts.
“In legal terms, this is the first contested case ever that involves an uncompleted merger transaction, and establishes that courts will analyze all relevant transactions, including the ones that take place after the merger had been agreed,” said Kent Thomson, who was lead counsel for Shaw and is a partner in Davies Ward Phillips & Vineberg LLP’s Toronto office. “It also demonstrates in the clearest way the ability of the FCA and the Tribunal to handle high stakes commercial litigation in real time. And from a business perspective, it will reconfigure the industry both on the wireless and wireline [where physical cables or wires transmit signals, as in the case of telephone lines] sides.”
The case originated when Rogers and Shaw announced a merger. Later, Shaw’s sale of its subsidiary, Freedom Mobile Inc., to Vidéotron Ltd. (owned by Quebecor) became part of the overall transaction. The Commissioner of Competition applied to block the overall transaction, but the Tribunal ruled that the merger was not likely to prevent or lessen competition substantially.
The FCA agreed.
In doing so, the court dismissed the commissioner’s argument that it should not consider the Vidéotron transaction, proposed after the Tribunal proceedings began.
“The Competition Act aims to address truth and reality, not fiction and fantasy,” the court wrote. “Examining the merger alone — a merger that, by itself, will not and cannot happen without the divestiture — would be a foray into fiction and fantasy.”
In support of his contention that these proceedings are significant also because they demonstrate the ability of the Tribunal and the FCA to handle real time commercial litigation effectively, Thomson notes that the six-month process involved 15 contested interlocutory motions and 45 affidavits from witnesses, with a drop-dead date for the transaction hovering over the proceedings; the Tribunal issued its reasons just two weeks after 45 days of hearing concluded, on Dec. 29; and the appeal was argued and decided on the merits in less than a month thereafter, on Jan. 23; the FCA rendered its decision on the same day that it heard the case; and all the proceedings at the Tribunal were conducted virtually.
“This case tested the system and its virtual capacities to the limit, and the system worked,” Thomson said. “Everyone involved at every level recognized that drop dead dates are meaningful and that if the courts are going to play an effective role in determining legality, they have to move incredibly quickly.”
Thomson also believes that the decision’s impacts may be underrated.
“People focused on the wireless side and the sale of Shaw’s wireless operations to Vidéotron, but they tended to lose sight of the impact on wireline. Shaw’s primary business was wireline and by absorbing that, Rogers can now compete nationally in that space, even in Telus’ home provinces of Alberta and B.C. And the wireless divestiture to Vidéotron, which promised to reduce prices in Western Canada, allowed Quebecor to compete nationally. So, the transaction has a real capacity to address competition and transform the industry. In business terms, it could not have been more significant.”
APPEARANCES: Justice Canada; Lax O’Sullivan Lisus Gottlieb; Davies Ward Phillips & Vineberg LLP; Bennett Jones LLP
Julius Melnitzer is a Toronto-based freelance legal affairs journalist and communications and media consultant to the legal profession. He can be reached by email directly at [email protected] or at his website, www.legalwriter.net.