On December 8, 2009, the Superior Court of Québec
per the Honourable Justice Joel A. Silcoff granted a
motion by the National Bank of Canada (Bank), authorizing it to
omit some 38 proposals submitted by a shareholder for inclusion in
the Management Proxy Circular to be distributed in advance of its
2010 Annual General Meeting of Shareholders. In its reasons, the
court stated clearly, for the first time, that proposals that are
"neutral" or otherwise permissible on their face can
nevertheless legitimately be excluded if the context in which they
are submitted indicates abuse by the shareholder.
A shareholder of the Bank with a history of litigation and
confrontation with the Bank submitted 38 proposals for inclusion in
the Management Proxy Circular to be distributed in advance of the
Bank's 2010 Annual General Meeting of Shareholders. The Bank
refused to include the shareholder's proposals, relying on
Sections 143(5)(b) and (e) of the Bank Act. Those sections
authorize a bank to refuse to include proposals in a circular if it
clearly appears that the primary purpose of the proposals is to
enforce a personal claim or redress a personal grievance against
the bank or its directors, officers or security holders; or if the
rights to submit proposals are being abused by the shareholder to
The relevant provisions from the Bank Act are
essentially identical to those found in Sections 137(5)(b) and (e)
of the Canada Business Corporations Act (CBCA).
However, as noted by the Honourable Justice Silcoff in his reasons,
there is a relative paucity of jurisprudence under both the
Bank Act and the CBCA on the question of the
grounds justifying a refusal to include shareholder proposals.
It is now well-established that a proposal can be excluded under
Section 143(5)(b) of the Bank Act where, on its face, the
proposal is found to be clearly intended to enforce a personal
claim or redress a personal grievance. However, until recently,
there was to our knowledge no case law clearly acknowledging a
bank's or a CBCA corporation's right to exclude
"neutral" shareholder proposals submitted abusively by a
shareholder, either under Section 143(5)(b) or (e).
In his December 8, 2009 decision, the Honourable Justice Silcoff
held that the context in which the shareholder proposals were
submitted, which included ongoing litigation with the Bank, recent
judicial proceedings commenced by the shareholder against the Bank
seeking the removal of certain directors, illegal proxy
solicitation by the shareholder that had been confirmed by an order
of the Supreme Court of Nova Scotia, a "barrage" of
complaints contained in numerous letters and e-mails addressed by
the shareholder to various officers and directors of the Bank, and
abusive and disruptive behaviour while in attendance at the
Bank's last annual general meeting, clearly demonstrated that
the primary purpose of the proposals was to advance the
shareholder's personal claims or grievances against the Bank
and that they were submitted in an abusive manner to secure
publicity for himself.
Significantly, the court found that, although some of the
proposals may appear on their surface to be neutral, even these
should be excluded in light of their timing, the circumstances in
which they were submitted, and the "evident abusive exercise
by [the shareholder] of what, in normal circumstances, might be
considered his rights as shareholder." In other words, the
court clearly established that the context in which proposals are
submitted can be sufficient to justify the refusal to include them
in a management proxy circular.
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