In Ontario, a Superior Court order made "under the Corporations Act" is appealed to the Divisional Court. But it is not always clear exactly what constitutes an order made "under the Corporations Act". In its September 14, 2015 decision in Pruner v. Ottawa Hunt and Golf Club, the Ontario Court of Appeal held that this provision should be broadly interpreted. Despite the appeal having been brought in the wrong court, the Court nonetheless reconstituted itself as the Divisional Court and decided the appeal on the merits.
The Background Facts
A golf club member ("Pruner") sought to transfer from a playing membership to a social membership without losing his Class B share. The golf club, citing an internal policy, decided that he needed to resign his membership (and thus lose his share), and then re-apply for the new type of membership.
The Ontario Corporations Act is the antecedent to the Ontario Business Corporations Act ("OBCA"). When the OBCA was enacted in 1971, a handful of corporations remained subject to the Corporations Act, including those that have "objects in whole or in part of a social nature". The golf club is such a corporation. Pruner commenced an application in the Superior Court to compel the golf club to approve his transfer request, arguing that the golf club's policy amounted to a unilateral "variation or restriction of the rights attached to his Class B share" in violation of the Corporations Act. He was unsuccessful before the Superior Court.
Appellate Jurisdiction
After the hearing of the appeal, the Court sought submissions on the applicability of s. 326 of the Corporations Act, which provides that "an appeal lies to the Divisional Court from any order made by a court under this Act." Counsel argued this section was inapplicable. For a unanimous Court, Justice Pardu disagreed for three reasons.
First, Justice Pardu rejected an analogy to the Supreme Court of Canada's decision in Kelvin Energy Ltd. v. Lee. In Kelvin, a settlement had occurred and, subsequently, a court order was obtained under the Quebec Code of Civil Procedure. The Supreme Court held that this order was not made "under the Canada Business Corporations Act". Subsequent Ontario Court of Appeal case law had confined the applicability of Kelvin to cases where the actual substance of the order being appealed was far removed from the applicable corporate law statute. In Justice Pardu's view:
[45] In the case at bar, the fundamental premise of Mr. Pruner's application was that the Corporations Act – and s. 34(4) in particular – prevents the Board from unilaterally changing the rights associated with his Class B share. The Corporations Act is the lynchpin of his argument and is cited in his notice of application as one of the "grounds for the application".
[46] The notion that the Corporations Act was central to the application is reinforced in the application judge's reasons. He explained, at para. 32, that his decision "ultimately turns on an interpretation of the Board's power to implement the new policy in accordance with the Corporations Act, the common law, the Club's Supplementary Letters Patent and governing By-Laws" (emphasis added by Justice Pardu).
[47] Like its successor legislation, the OBCA, the Corporations Act does not contain its own procedural code but rather is subject to the Rules of Civil Procedure. In McLaughlin, O'Connor A.C.J.O. rejected the suggestion that the order under appeal was "made under" rule 26.01 rather than under the OBCA. In my view the same reasoning applies here. Accordingly, I reject the parties' submission that the order under appeal was "made under" Rule 14 rather than under the Corporations Act.
Second, Justice Pardu observed that s. 332 of the Corporations Act "provides for a remedy for an aggrieved shareholder such as Mr. Pruner who is of the view that a corporation has failed to perform a duty" and his application could fairly be framed as seeking relief within the meaning of this provision.
Third, the Ontario Court of Appeal has "taken an expansive view of what constitutes an order 'made under' the OBCA" (para. 50). In Justice Pardu's view, the Corporations Act should be interpreted in the same way.
Ultimately, Justice Pardu decided:
[52] I conclude for these reasons that the application judge's order dismissing Mr. Pruner's application was an order made under the Corporations Act, and that the appeal should have been brought to the Divisional Court.
[53] The jurisdiction issue was not detected until after hearing. Because the parties had fully argued the merits of the appeal, this court sought a designation by the Chief Justice of the Superior Court of Justice to constitute the judges of the Court of Appeal in this matter as justices of the Divisional Court pursuant to s. 18(2) of the Courts of Justice Act. As Rosenberg J.A. observed in Villa Verde L.M. Masonry Ltd. v. Pier One Masonry Inc. (2001), 54 O.R. (3d) 76 (C.A.), at para. 12, this court is rarely reconstituted as Divisional Court: "It is an option that is generally only resorted to where the jurisdictional issue is noticed after the appeal has been argued and is done to save the parties the expense and inconvenience of having to reargue the appeal."
[54] Having received that designation, the panel is reconstituted as the Divisional Court.
Conclusion
On the merits, Justice Pardu dismissed the appeal, concluding that the policy at issue "cannot be fairly construed as a variation or restriction of the rights associated with Mr. Pruner's Class B share. He is entitled to keep that share, exercise the voting rights associated with it, and golf as much or as little as he wishes" (para. 5).
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