On September 20, 2012, the British Columbia Supreme Court
granted a shareholder's request to appoint an independent chair
in connection with Western Wind's annual meeting of
shareholders. The shareholder's request was made in
connection with a fiercely contested proxy battle to replace the
Company's board of directors. The Company's defence
included the initiation of legal proceedings against the
shareholder, proceedings which were ultimately abandoned or
dismissed. Complicating matters, the Company's Chairman
of the Board, who, in accordance with the Company's by-laws,
would otherwise be entitled to chair the meeting, was also a senior
executive reporting to the Company's President and CEO. In
these circumstances, the Court reasoned that allowing the existing
Chairman to chair the meeting raised a "reasonable
apprehension concerning the conduct of the meeting".
In July 2012, Western Wind announced its board of directors had
determined to seek a sale of the Company. Following the
announcement, Savitr Capital, the dissident shareholder, announced
that it was proposing five director nominees to replace the
existing board and to oversee the sale process. This set off a
proxy contest for control of the board.
In the proceedings before the Court, the dissident alleged that
the Company, led by its President and CEO, launched an aggressive
and hostile campaign, which included filing applications in the US
and Canada seeking to disqualify the dissident's proxies
because of its use, in alleged violation of the Company's
trademark rights, of the Company's logo in materials intended
to solicit proxies in favour of the dissident.
Savitr's petition to appoint an independent chair was filed
in response to Western Wind's application. Savitr raised
concerns that elements of the Company's organizational
structure prevented the Chairman from acting as a neutral party at
the Company's annual meeting. In particular, the dissident
noted that the Chairman also held the position of Executive Vice
President of Business Development and reported to the President and
The Court's Decision
The Court cited Re MTC Electronic Technologies Co., a
British Columbia Supreme Court decision, for the proposition that
it is not sufficient to suggest that a chairperson will act out of
self-interest because the meeting will deal with the election of
directors and the chairperson could lose his or her directorship.
The Court noted that if that were so, no existing director could
chair an annual meeting of shareholders since at such meetings the
possibility always exists that the directors will be replaced.
However, the Court also cited the judgement of the Supreme Court
of Canada in Blair v. Consolidated Enfield Corp., and
noted that the chairman of any meeting of shareholders is to
operate under a duty of administrative fairness directed toward the
best interests of the company. The Court held that in
instances where a company has advance notice or reason to
anticipate a contentious meeting, serious consideration should be
given to the appointment of an independent chair.
In the end, the Court was of the view that the series of events
leading up to the meeting, in combination with the Chairman's
relationship with the President and CEO, made it inappropriate for
the Chairman to chair the Company's annual meeting.
Despite the outcome in favour of the dissident, Western
Wind is consistent with a line of cases in which courts have
been reluctant to grant orders appointing an independent chair
based on the assertion of conflict of interest arising merely from
the fact the chair stands for re-election with the other directors.
Such a conflict exists in almost all annual meetings and has been
found to be insufficiently material to prevent the chair from
fulfilling the duties of chair in a fair manner. Where courts have
appointed an independent chair, they generally have done so on the
basis of a more acute conflict of interest or where there is
evidence of bias that suggests that the appointment of an
independent chair is necessary to create the perception of
Notwithstanding the courts reluctance to intervene, it is
nevertheless common practice for a dissident to request that a
company appoint an independent chair in the context of a proxy
battle. While under no obligation to do so, a company may (if
its by-laws permit) grant such a request, often in connection with
establishing a common set of protocols with the dissident to govern
the conduct of the meeting.
Fasken Martineau has played a key role in many high profile
proxy contests and activist situations in recent years, including
the proxy contest for Canadian Pacific Railway.
In Ontario Securities Commission v. Tiffin, the Ontario Court of Justice clarified the limits of the definition of "securities" under s.1(1) of the Securities Act, as it relates to promissory notes. The defendant in the case was charged with trading in securities without being registered and while prohibited, and without filing a prospectus.
The OSC has issued a press release advising stakeholders that Ontario securities law may apply to any use of distributed ledger technologies, such as blockchain, as part of financial products or service offerings.
The use of electronic signatures is becoming increasingly commonplace in commercial transactions, as individuals and businesses capitalize on the administrative efficiency afforded by today’s digital world.
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