Law Times

PAGE 10 FOCUS AUGUST 11-18, 2008 / LAW TIMES Corporate lawyers wait for other shoe to drop BY IAN HARVEY For Law Times T he boardroom-to-court- room wrangle over the sale of BCE continues to pro- vide some classic twists and turns for corporate law observers — especially when it comes to weighing stakeholder interests. The Supreme Court of Can- ada gave partial direction on its thinking June 20 when it cleared the way for the $52-billion priva- tization of BCE to proceed. However, as Andrew Flem- ing, senior partner in Ogilvy Renault LLP's business group notes, the other shoe in the ruling has yet to drop. "They've said they disagree with Quebec Court of Appeal, but reasons to follow," he says, leaving corporate lawyers and their clients holding their breath to read the forthcoming judgment. "They could just be terse and not say much, leaving us all to read the tea leaves," he says. "Or they could go into murky depths of these issues and give us all some future guidance, which really is becoming a role of the court." Fleming says he' tailed judgment, since it would clarify issues around corporate governance and directors' duties going forward, particularly around mergers and acquisitions. "At least it would be some- d prefer a de- thing we could read and show to clients when we're discussing these issues," he says. The key issue in the dispute Kuretzky Vassos Henderson LLP is widely recognized as one of Canada's leading employment and labour law boutiques. We practice at the cutting edge assist- ing a wide spectrum of clients ranging from major corporate employers through to individual plaintiffs. Our practice includes employment contracts, wrong- ful dismissal, collective bargaining, labour board applications, arbitrations, adjudications, employ- ment standards, health & safety, human rights and ADR. 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The bondholders complained the value of their investments would plummet under the terms of the sale of BCE because of the mas- sive new debt the deal called for. They argued that, in maximizing shareholders' value, bondholders were being sacrificed. "It did not say what the outcome of that consideration should have been, just that they should have considered the bondholders, which they did not," says Fleming. The Quebec Superior Court ruling at the time seemed to fall in line with the consensus think- ing and direction from cases like Revlon Inc. v. Mac Andrew & Forbes Holdings Inc., which held, in the event of an offer, the board of directors' sole mandate and focus must be to maximize shareholder value. Michael Watson, adjunct pro- fessor of law at Osgoode Hall and partner at Gowling Lafleur Henderson LLP, which acted for Deutsche Bank AG in the ar- rangement, says, while the SCC decision could go in a number of directions, he agrees most practi- tioners and those in business are hoping for some clear direction. "We know the SCC unani- mously allowed the appeal and reversed the Quebec Court of Appeal but what that means is unclear," he says. "It may be that the SCC will simply say that the issue of fair and reasonable is a fac- tual issue and the appellate court ought not to interfere if there was not a — as the expression goes — palpable and overriding error — and there wasn't then Quebec Justice Joel Silcoff's original ruling should be restored." It could go a little wider, Wat- son says, with more details on corporate governance and direc- tor's duties, but still limited to the context of arrangements. "The eyes of the country are upon them in this," he says. "They took the unprecedented step of adopting a procedure to allow the appeal (in record time) on what was a unanimous Quebec Court of Appeal decision. If they decide this on very narrow grounds, there are going to be some very disap- pointed people." The hope is that the court will go further. "The third option is that the court could go further and will talk about directors' duties when a company is in play whether it's a hostile takeover or a negotiated strategic plan of arrangement," says Watson. In that eventuality ,there's some hope the SCC will bring the much referred-to 1986 Revlon decision into clearer re- lief. The U.S. case sets a clear duty for director in the event of a takeover: maximize share- holder value. commercial and business law- yers and litigators are hoping for," says Watson. "I think that's what most LT To advertise in an upcoming issue, contact our sales team: Canada Law Book is A Division of The Cartwright Group Ltd. Karen Lorimer 905-713-4339 www.lawtimesnews.com Marcus Gallie_Welcome_CPR (LT 1-4x3) .indd 1 8/6/08 11:54:44 AM klorimer@clbmedia.ca kpascoe@clbmedia.ca Kimberlee Pascoe 905-713-4342 rnoonan@clbmedia.ca Rose Noonan 905-726-5444

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