On April 7, 2014, Osler commented on the decision
of Justice David Brown of the Ontario Superior Court of Justice
(Commercial List) in Re Champion Iron Mines Limited. In
that case, the Court held that a fairness opinion from a financial
adviser obtained by the board of directors in connection with a
plan of arrangement was not admissible at the fairness hearing
because it did not meet the requirements of the Rules of Civil
Procedure applicable to expert evidence. As we noted then, the
ruling called into question whether, in the future, courts would
look for fairness opinions and disclosure documents that summarize
fairness opinions to contain enhanced disclosure of the underlying
financial analysis performed by, and fees paid to bankers, if the
opinion is being put forward as evidence of the substantive
fairness of the arrangement. In two recent decisions however,
separate judges from the same Court have questioned the correctness
of the decision in Champion Iron Mines and reverted to the
Court's traditional practice of considering "the presence
of a fairness opinion from a reputable expert" as among the
indicia of fairness when considering whether a proposed plan of
arrangement is fair and reasonable.
In Re Bear Lake GoldLtd., Justice Wilton
Siegelheld that, "in the context of M&A transactions
involving the acquisition of securities of an issuer by a third
party," a fairness opinion is admissible both as evidence that
the plan of arrangement is being put forward in good faith, as well
as evidence of the fairness and reasonableness of the proposed
transaction. In particular, Justice Wilton-Siegel found that:
a fairness opinion constitutes evidence that the board of
directors considered the fairness and reasonableness of the
transaction based on objective evidence; and
the disclosure of the fairness opinion to shareholders as part
of the management information circular and, in particular, the
reaction of shareholders and the market can provide further
evidence as to the fairness and reasonableness of the proposed
transaction and the integrity of the board of directors'
In Royal Host, Justice Newbould expressly adopted the
reasoning of Justice Wilton-Siegel in Bear Lake Gold
and added that, contrary to the ruling in Champion Iron
Mines, the purpose of a fairness opinion was a commercial one
and a fairness opinion is not intended to be an expert report in a
Notably, in Bear Lake Gold, the Court stated that, in
proposed plans of arrangement which did not involve the acquisition
of securities of the issuer by a third party, but rather, for
example, a reorganization of the interests of the existing
securityholders, "if a party proposes to qualify a fairness
opinion as expert evidence under the Rules of Civil
Procedure, the detailed analysis that grounds the fairness
opinion must be available if required by any objecting
As previously noted by Osler, these decisions highlight the
continued utility to a board of directors of receiving expert
financial advice and fairness opinions from reputable financial
advisors as an important part of the process by which directors
discharge their duty of care and make informed decisions in the
M&A context. To date these decisions do not appear to
have affected Canadian disclosure practices regarding fairness
opinions and the underlying financial analysis.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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