In its recent decision in Orange Capital, LLC v Partners
Real Estate Investment Trust, 2014 ONSC 3793, the Ontario
Superior Court has offered new guidance on the interpretation of
advance notice provisions used in the context of a proxy
contest. The decision is another victory for Norton Rose
Fulbright's Special Situations team, which represented Orange
Capital in this litigation.
In April 2014, Partners Real Estate Investment Trust (the
REIT) announced that its annual and special
meeting of unitholders (the Meeting) would be held
on June 26, 2014. The REIT later postponed the Meeting to
July 15, 2014. On June 6, 2014, Orange Capital, a unitholder
in the REIT, provided notice of its intention to nominate trustees
to the board of the REIT at the Meeting on July 15, 2014.
The REIT took the position that Orange's nominations were
invalid because Orange had not complied with the REIT's advance
notice policy (the Policy), which required
unitholders wishing to nominate trustees to the board to provide
notice to the REIT "not less than 30 and no more than 65 days
prior to the date of the annual meeting of unitholders."
The REIT argued that the original date of the Meeting should be
used for the purposes of applying the Policy, meaning that any
nominations for trustees were due between April 22 and May 27,
2014. Orange countered that the Policy should be interpreted
to mean that the nomination window is triggered by the actual date
of the Meeting, not the originally scheduled date.
The Court found that both the plain meaning and the policy
rationale behind the Policy support Orange's
interpretation. The Court's purposive analysis of the
Policy is particularly instructive. Justice Wilton-Siegel
noted that there were important limits on an issuer's use of
Advance notice policies are intended
to be a shield to protect shareholder or unitholders, as well as
management, from ambush; they are not intended to be a sword in the
hands of management to exclude nominations given on ample notice or
to buy time to develop a strategy for defeating a dissident
The Court held that the REIT's interpretation of the Policy
would have the effect of excluding a nomination that occurred after
the initial nomination window closed, notwithstanding that the
timelines of the Policy had been respected. The Court also
questioned an interpretation of the Policy that would foreclose
further nominations even if a shareholder meeting were postponed or
adjourned "by reason of material development in the affairs of
an issuer that might well call into question the appropriateness of
the existing directors and management."
More generally, the Court suggested that there was no
demonstrable need for unitholders to have advance knowledge of
nominations contemplated for a future meeting of any period beyond
the 30-65 day period provided by the Policy. The Court's
endorsement of such a period echoes the recommendation of similar
periods by leading corporate governance firms such as ISS.
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In Irwin v. Alberta Veterinary Medical Association, 2015 ABCA 396, the Alberta Court of Appeal found that the "ABVMA" failed to afford procedural fairness to a veterinarian undergoing an incapacity assessment.
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