Samer_BA_FW_Fall2017

I NTERNATIONAL P OWER V M C M ASTER : ( COMPANY HAD TWO CLASSES OF SHARES , COMMON AND PREFERRED , BUT THERE WAS NO PROVISION FOR WHAT HAPPENED TO EXCESS ASSETS AFTER ALL SHARES ARE PAID OFF UPON LIQUIDATION ) 25 R E B OWATER C ANADIAN L TD . AND RL C RAIN I NC . ( PROVISION IN ARTICLES STATING : 25 J ACOBSEN V U NITED C ANSO O IL AND G AS L TD .: (B YLAW : NO PERSON SHALL BE ENTITLED TO VOTE MORE THAN 1000 SHARES REGARDLESS OF HOW MANY SHARES THEY OWNED ) 25 E DMONTON C OUNTRY C LUB V C ASE : ( PROVISION IN A RTICLES THAT THE B O D MUST CONSENT TO TRANSFER OF SHARES ) 25 N ESLSON V R ENTOWN E NTERPRISES I NC .: ( CORP BECAME INSOLVENT AFTER SIGNING BUT BEFORE CLOSING OF LAND SALE CONTRACT ) 25 GOVERNANCE OF THE CORPORATION 25 Q UALIFICATIONS OF D IRECTORS 25 N UMBER OF D IRECTORS 26 R ESIDENCY R EQUIREMENT 26 A PPOINTMENT OF D IRECTORS 26 E LECTION OF D IRECTORS 26 R EMOVAL OF D IRECTORS 26 C EASING TO H OLD O FFICE 26 M ANAGEMENT P OWER V ESTED IN D IRECTORS 26 S HAREHOLDER ’ S P OWER 26 V OTING P OWER 26 S HAREHOLDER P ROPOSALS 26 U NANIMOUS S HAREHOLDER A GREEMENTS (USA) 27 F UNDAMENTAL C HANGES 27 R EMEDIAL P OWERS 27 FIDUCIARY DUTIES – S. 122(1)(A) 27 N ATURE AND S COPE OF F IDUCIARY D UTY 27 P EOPLES D EPT . S TORES V W ISE 27 F IDUCIARY D UTY 28 1) C OMPETITION WITH THE C ORPORATION (C ONFLICT OF I NTEREST ) 28 2) D ISCLOSURE OF I NTEREST IN M ATERIAL C ONTRACT 28 W HAT IS M ATERIAL ? 28 C ONSEQUENCES FOR F AILURE TO D ISCLOSE 29 V ALIDITY OF C ONTRACT : 29 C ONFIRMATION BY S HAREHOLDERS 29 3) T AKING C ORPORATE O PPORTUNITIES 30 DUTY OF CARE – S. 122(1)(B) 31 S TANDARD OF C ARE 31 L IMITATIONS AND D EFENCES 31  B USINESS JUDGMENT RULE (BJR) ( APPLIES ONLY TO D O C) 31 I NDEMNIFICATION OF D IRECTORS 32 CHOOSING BETWEEN DERIVATIVE ACTION AND OPPRESSION 32 DERIVATIVE ACTION 32 3

PARTNERSHIPS Is there a Partnership?  Section 1(g) - elements  Section 4: several negative rules about “what does not create a partnership” of itself: like joint tenancy, debt payments, gross revenue, contract for enumeration, a person surviving a partner. Sharing of profit does create a partnership in the absence of evidence to the contrary.  Need to satisfy three tests 1) Carrying on a business Miah v Khan (agreed to open a restaurant, did the renos, signed contracts including linens, began advertising)  The rule is that persons who agree to carry on a business activity in common do not become partners until they actually embark on the activity in question  However, ‘actually embarking on the activity in question’ is satisfied where the parties took positive preparatory steps to establish the business  If the parties embark on the venture on which the parties had agreed, there is a partnership  A very broad definition of “carrying on a business” used the film analogy. 2) In Common  Acting in common – Going into business together  A partnership is formed if parties to a venture go into business together with a view to sharing the venture’s profit, with or without an agreement ( Red Burrito – opening new restaurant)  Factors to consider whether the parties acted in common ( Red Burrito ) o They both acted on their plans o Both contributed effort, knowledge, and skills o Both were involved in the management of the joint venture o Parties’ intention o Didn’t matter: they did not incorporate Newco as agreed, and did not assign lease  Other Factors ( Westlock Foods – building a mall, unpaid invoice to Contractor) o Contribution of capital o Executed debenture together o Joint bank account o Represented themselves as partners – shows intention o Didn’t matter: not all property titles were assigned to partnership, only one party had signing authority o Didn’t matter: control over the business: Control has nothing whatever to do with the existence of a partnership (not in the definition) 3) With a View to profit  Parties must intend to make a profit  Both objective and subjective elements are applied : Court will inquire as to whether the objective , evidence surrounding facts, including what the parties actually did, are consistent with a subjective intention to carry on business in common with a view to profit ( Backman ) o It is sufficient to show that there was an ancillary profit-making purpose ( Backman )  The law does not require a net gain over a determined period in order to establish that an activity is with a view to profit ( Spire Freezers )  Backman : The Canadians disposed of the condo building right away: “oThe appellant was not a member of a partnership because there was no business being carried on in common with a view to profit”  Spire Freezers : Canadians continues to run the condo buildings and make profit, then they eventually declared a loss  ran a business with a view to profit. 6

o On death of a LP, executor has whatever power the deceased had to constitute the deceased’s assignee a substituted LP, S. 68 o Priority on settlement of accounts on dissolution, S.73 Limited Liability Partnership  Designed for “eligible professions” S.81/82  Requires registration with the Registrar – begin as an ordinary partnership S.82  Content of the application for registration, S. 82(4), registration must include: o Name of the partnership o Eligible profession or professions which the partners practice o Name and address of the partner designated as the rep of the firm o Address of the registered office of the firm o A statement from a person authorized by the governing body of the profession certifying  The partners have insurance  The partners meet all the other requirements  Effect of registration (84) o Subject to any agreement between the partners , the registration of a partnership as an Alberta LLP does not cause the dissolution of the partnership, and the Alberta LLP continues as the same partnership that existed before the registration  An LP may NOT be registered as an Alberta LLP , s. 82(3)  Notice must be sent to clients explaining the change in the liability of the partners as a result of registration as an Alberta LLP, s. 85. Legal Status of a Partnership  Partnerships do not have a separate legal existence from individuals ( Thorne – cannot be employee of own partnership and therefore can’t get WCB ) – cannot contract between partnership and partner Contents of a Partnership Agreement (usual)  Name of the firm o Part of the goodwill of the business o Belongs to all partners o Registration may be required - s. 106 o Name of a LP: s. 54  Cannot contain surname of an LP  If it did AND the client did not know he’s an LP  LP will be treated as a GP  Description of the business o The scope of a partner’s authority to bind other partners depends on the nature of the partnership business  Membership - Admission and expulsion of partners  Capitalization - Who contributes what and when?  Partner’s interests: Sharing of profits/losses - Formula  Partnership property  Management o Who is in charge? o Decisions – how made? o Majority or consent of all partners? o Any remuneration?  Dissolution – Methods/Process 9

 Liability of incoming and outgoing partners , s.20 o A person admitted as a partner into an existing firm does not become liable to the creditors of the firm for anything done before the person became a partner o A partner who retires from a firm does not by reason of retirement cease to be liable for partnership debts or obligations incurred before the partner’s retirement o A retiring partner may be discharged from any existing liabilities by an agreement to that effect between  that partner and  the members of the firm, as newly constituted, and  the creditors.  Such an agreement may be either expressed or inferred as a fact from the course of dealing between the creditors and the firm as newly constituted.  Rights of people dealing with firm after change in the firm’s constitution (i.e. make-up) , s.40 o The person is entitled to treat apparent members of the old firm as still being members of the firm until the person has notice of the change. o Estate of a partner who dies, assigns his interest to creditors, becomes bankrupt, or was not known to the person dealing with the firm to be a partner and then retires,  Is not liable for debts contracted after date of above incidents Case Summaries: E&Y v Falconi : Falconi committed fraud, client sued the firm which was held liable for Falconi’s improper purpose action. Strother : was a partner at firm, advised client a certain way, then left and started a new company to take advantage of a new scheme…firm liable for Strother’s actions while he was a partner. Liability of Partners in an Alberta LLP  A partner in an LLP is not individually liable for the negligence, wrongful acts or omissions, malpractice or misconduct of o Another partner, or o An employee, agent, or representative of the LLP That occur in the ordinary course of carrying on practice in an eligible profession, s.12(1) o Exception, s.12(2) – negligence combined with:  Knowledge of the negligence and failure to take reasonable steps to prevent its commission  Negligence by a person under the partner’s supervision, and where the partner failed to competently supervise such a person. 12

Cases: o ( Panda Flowers ): (guy signed franchise agreement before getting proper disclosure document, was shown screen grabs of the finances)  Disclosure did not comply with the Act, was not given in time and did not contain financial statements  Notice of cancellation, when timely and properly implemented, will cause the franchise agreement to be cancelled o ( Hi Hotel ): (guy was given Ontario disclosure document, no certificate, no AB document)  Failure to provide accurate and complete information is fatal to an agreement  The provisions of the Franchises Act are Mandatory!!! o ( Essa v Mediterranean Franchise Inc .): signed agreement and started fast food restaurant which failed after 9 months, Essa sued for deficient Disclosure)  The disclosure did not comply with several sections in Schedule 1 of the Reg and therefore was not substantially complete. Section 13 clock did not run. o ( 6792341 Canada ): (disclosure document was missing a lot of stuff)  Even though information may be called disclosure, it must contain the substantive elements required – “ Calling something a disclosure document doesn’t make it one “  Regulation requires o 1- Reg 2(1): Disclosure of all material facts including material facts related to matters set out in Schedule 1  ( Essa ) o 2- Reg 2(2): Different jurisdiction requirements o 3- Reg 2(3): Certificate (vouching for the disclosure document)  Signed and dated by the Franchisor  Number of signatories  Reg 2(3)  ( Asian Concepts ) Certificate did not comply with number of signatures and was held invalid (not substantially compliant) Cases: o ( Hi Hotel ): Failure to provide a signed and dated certificate is fatal to the franchise agreement o (Asian Concepts) : The Disclosure Document was not substantially complete because it did not meet the “plain and obvious” signature requirements o ( Essa v Mediterranean Franchise Inc .): The disclosure did not comply with several sections in Schedule 1 of the Reg.  Franchisor must also provide a description of material change , if any S.4(4-5) o Meaning of ‘material change’: s. 1(1)(n): “(a change) that would reasonably be expected to have a significant adverse effect on the value or price of the franchise to be sold or the decision to purchase the franchise” Exemptions from Section 4, found in Section 5 (i.e. not material changes)  Sale of a franchise by the Franchisee (third party sale, so caveat emptor)  Sale of a franchise to a person who is an officer or director of the franchisor for at least 6 months  Sale of an additional franchise to an existing franchisee  A renewal or extension of an existing franchise agreement  Further exemption by the Minister, S.6 Failure to give Disclosure Document  s. 13  Franchisee has right to rescind agreement, by giving a notice of cancellation, but has limited timeframe to give the notice “(a) No later than 60 days after receiving the Disclosure Document, or (b). No later than 2 years after the franchisee is granted the franchise,” 15

CORPORATIONS Constitution  CA 1867 s. 92(11) gives the provinces the power over “Companies with provincial objects”  Federal power o Companies with objects other than provincial  Banks, telecom.  Companies incorporated under the CBCA  Citizens Ins. Co. v Parsons Jurisdiction to Regulate  1) Federal regulation of provincial corporations  Limited to a few areas within the legislative competence of the federal government  2) Provincial regulation of federal corporations  Federal corps are subject to provincial laws if the laws are not inconsistent with federal law o NOTE: the province cannot legislate so as to deprive a dominion company of its status and powers John Deere Plow v Wharton  3) Extra-provincial corporations o Regulated by both federal and provincial governments o Regulation must be within the constitutional power of the regulating government Application of the Charter to Corporations  Corporations can have standing to challenge constitutionality of legislation applied to them o Big M Drug Mart : in criminal proceedings  Corporations can invoke the Charter when they are defendants in civil proceedings instigated by the state or a state organ pursuant to a law or regulatory scheme ( CEMA )  Corporations enjoy certain rights like the freedom of expression guaranteed by the Charter ( RJR MacDonald ) Methods of Incorporation Articles of Incorporation  Filed with a designated government official (Registrar in Alberta)  Contents of Articles of Incorporation ( section 6 ABCA) o Name o Number of directors o Registered office o Capital structure o If 2 or more classes of shares, the rights and privileges attached to each class of shares o Any restriction on share transfer or the business of the company  Used in CBCA and almost all provinces  Re: Bylaws o In some jurisdictions, the rules governing the daily operations of the company are set in the bylaws (Bylaws are NOT filed with the government) o However, the ABCA allows Articles of Inc. to include matters usually set out in the Bylaws: s.6(2) Other Forms of Incorporation ( CANs )  Letters Patent (PEI)  Special Acts of Parliament (Crown Corps)  Memorandum of association and articles of association (Nova Scotia) 18

 Effect of Adoption ABCA s.15(3) o Corporation is bound by the contract o Corporation is entitled to the benefits of the contract as if it had been in existence at the date of the contract and had been a party to the contract ( 1394918 Ontario Ltd. ) o Agent ceases to be liable  Application to Court for joint or joint and several liability ; ABCA, s.15(5)  Express provision is required in the contract for exemption from personal liability; ABCA, s.15(6) o If a pre-incorporation contract is written and the signor wishes to be excluded from personal liability, then the express term must be included ( Huang ) o If a pre-incorporation contract is oral, then common law applies, and verbal opposition to personal liability is enough (i.e. no intention of the parties existed) ( Huang ) CASES:  Sherwood : (contract to purchase assets, solicitor sent letter stating company was formed and included directors resolution to adopt the contract)  1394918 Ontraio Ltd : (contract to sell land, Stern as trustee agreed to repudiation, later formed company and assigned his rights to the company, company sued  the filing of the suit was declared intention to adopt the contract)  Huang : (agreement to develop technology, Huang verbally indicated his refusal to accept personal liability  because there was a written contract, the verbal opposition was not enough -> need express provision) Nature of the Corporation Separate Legal Personality  The corporation has a separate legal personality from its shareholders ( Salomon ) ( Lee v Lee’s Air Farming Ltd)  A corp has perpetual existence  It exists beyond the lives of its shareholders  A corp has the capacity, rights, powers and privileges of a natural person, ABCA s.16(1) o Articles may restrict the power of a corp. ABCA 17(2)  Thus, a corp owns its own property/assets - NOT the shareholders  A corp can sue and be sued in its name CASES:  ( Lee ): (owner/director killed while flying company airplane – wife wanted WCB payment) o An individual can be employed by a corporation to which they are the sole shareholder and director since they are distinct legal entities Limited Liability  Shareholder’s liability is limited to their share ownership in the corporation o Limited to the capital they contributed or agreed to contribute  NOTE o AB allows Unlimited Liability corporations  Must have ULC in the name - ABCA, Part 2.1, ss. 15.1-15.9 Lifting the Corporate Veil  Definition: Disregarding of the separate legal personality principle  Separate entities principle is not enforced when it would yield an unjust result, “too flagrantly opposed to justice” ( Kosmopoulos )  Examples when the corporate veil will be lifted o Company is a mere sham or shell or agent of the controlling shareholder – avoiding personal contractual obligations (non-solicitation) ( Gilford Motor ) 21

o The shareholder uses the company as a vehicle to commit fraud ( Big Bend Hotel ) o The controlling shareholder uses the company to engage in illegal or objectionable conduct ( Tax avoidance) o Parent & subsidiary company - Non-arm’s length transaction o Controlling shareholders expressly direct a wrongful act to be done – financial commitment when the corp has no assets. ( 642947 Ontario Ltd v Fleischer ) Canadian Courts have adopted two main approaches when determining whether the veil should be lifted on the grounds of agency  1) Extensive control approach o Is the shareholder the head and brain of the corp? o See the criteria in ( Smith, Stone and Knight Ltd. v Birmingham Corp )  Were the profits treated as profits of the shareholder?  Were the persons conducting the business appointed by the shareholders or parent company?  Was the shareholder the head and brain of the business of the company?  Did the shareholder govern the venture, decide what should be done and what capital should be embarked on the venture?  Did the shareholder make the profits by its skill and direction?  Was the shareholder in effectual and constant control?  2) Purpose of incorporation/use approach ( AB Gas Ethylene Co v MNR ) o Was the corp incorporated or used for improper/illegal purpose? ( Big Bend Hotel ) CASES :  Macaura v Northern Assurance co o English Case: o A sole shareholder has no insurable interests in the assets of the company o Assets belong to the company, not the shareholder  Kosmopolous : (couple had a leather business, consulted a lawyer, he advised to get a corp set up, but neglected to assign property lease to corp, owners later obtained insurance policy under own name) o Should the corp veil be lifted?  The veil could be lifted to do justice, but there are a number of factors that indicate it shouldn’t  1) Mr. K was advised by a competent lawyer  2) Need to avoid arbitrary outcomes (i.e. between one owner and multiple owner companies)  So no, the veil should not be lifted o Do sole shareholders have an insurable interest in the assets of the company?  Macaura should not be followed anymore.  So yes, He had a moral certainty of advantage or benefit from those assets but for the fire . He had, therefore, an insurable interest in them capable of supporting the insurance policy  Big Bend Hotel : (owner had a company which owned a hotel that was damaged by fire, he did not declare that in his insurance application for a new company with a new hotel – on the premise that the two companies are separate and distinct persons. o However, this principle can be disregarded where the principle is being used for fraud or improper conduct o K is hiding under the separate legal personality principle to commit fraud  642947 Ontario Ltd. v Fleischer : (property value went down due to crash in market, in the middle of subsisting injunction o Court was willing to lift veil  because the owners controlled the company, knew their were no assets, and still promised an undertaking to pay for damages. i.e. control + improper purpose 22

Statutory Exceptions (liability through the corporate veil)  Directors’ liability for wages “Directors of a corporation are jointly and severally liable to employees of the corporation for all debts not exceeding 6 months wages payable to each employee for services performed for the corporation while they are directors.” ABCA, s. 119(1). See also CBCA, s. 119(1).  NOTE : Directors are not liable for wages in certain circumstances. See ABCA, s. 119(2-4); CBCA, s. 119(2)&(3)  If director subjectively believes on objective grounds the corp can pay the debts as they fall due, or  If the debts payable are for services performed while the property of the corp is under control of a receiver, manager, or liquidator  Shareholders are liable for wages under a Unanimous Shareholder Agreement (USA). ABCA, s. 146(7); CBCA, s. 146(5) Shares in the Corporation Share Capital: Nature  A share is a bundle of rights against a corporation o It is not a property right in the corporation, not ownership interest in the corporation  While the corporation is ongoing, shares confer no right to its underlying assets BCE v. 1976 Debentureholders at para. 34 (SCC).  Consideration o Must be fully paid for shares s. 27(3) o A share shall not be issued until the consideration for the share is fully paid in money or in property or past services s. 27(3) o Shares shall be in registered form and shall be without nominal or par value ABCA, s.26(1)  Security [Share] Certificate o Every security holder is entitled at their option to  A security certificate or  A non-transferable written acknowledgment of their right to obtain such a security certificate from the corporation ABCA, s.48(1)  Contents of a Share Certificate ABCA, s.48(7) o 1) Name of the corporation o 2) The words “incorporated under the [CBCA or ABCA]” o 3) The name of the person to whom it was issued o 4) The number and class of shares and the designation of any series that the certificate represents o 5) Particulars of class; ABCA, s. 48(10) Rights Attached to Shares  Rights are attached to shares, not the shareholder  A corporation may have o One class of shares, ABCA, s.26(3) o More than one class of shares (multiple classes of shares), ABCA, s.26(4)  Where a corporation has only one class of shares, the rights of the holders thereof are equal in all respects and include the rights : ABCA, s.26(3) o To vote at any meeting of the shareholders of the corporation; o To receive any dividend declared by the corporation 23

o To receive the remaining property of the corporation on dissolution  The articles may provide for more than one class of shares, and if so, they provide o The rights set out in subsection (3) shall be attached to at least one class of shares but all such rights are not required to be attached to one class; ABCA, s.26(4) Equality of Shares  The general principle is that all shares are equal, BUT  Different rights may be attached to different classes of shares; ABCA, s.26(4) o A provision in a company’s articles dividing its shares into different classes, with different rights , is a valid derogation from the principle of equality of shares ( McClurg ) o If articles do not make any provisions for classes of shares, then all shares are treated equally ( International Power )  There was no provision on how to deal with excess assets, after all shares were paid off on voluntary liquidation. Equality of Rights of Shares of the Same Class  ABCA, s.26(5) – Subject to s.29, if a corporation has more than one class of shares, the rights of the holders of the shares of any class are equal in all respects ( Re Bowater Canadian Ltd )  EXCEPTION , s.29 ABCA – Permits the issue of shares of the same class in series o Thus, different rights may be attached to different series of the same class of shares The Right to Vote  A shareholder’s right to vote is exercised on the basis of the number of shares held by them ABCA, s.26(3) o Jacobsen v United Canso Transfer of Shares  Shares are transferable, but the Articles may restrict the share transfer ABCA, s.6(1)(c)  Restrictions on share transfer are noted on the share certificate ABCA, s.48(10),(11)  A common restriction is that any transfer must be approved by the BoD ( Edmonton Country Club )  A distributing company CANNOT restrict share transfer except by way of a constraint permitted under s.174; ABCA, s.48(9) Pre-Emptive Rights  Pre-Emptive right ABCA, s.30(1) Shareholders can have pre-emptive rights to acquire shares If the articles or USA provides  Shareholders have no pre-emptive right in respect of shares to be issued ABCA, s.30(2) o For a consideration other than money o As a share dividend o Pursuant to the exercise of conversion privileges, options or rights previously granted by the corporation Corporation Holding or Acquiring its Own Shares  A corp. cannot hold its own shares ABCA, s.32(1))  A subsidiary corp. cannot hold shares in its parent corp. ABCA, s.32(1);  Exceptions ABCA, ss.32(1)(2.1)(2.2)& 33-36 o Temporary holding (max 30 days) o Corp. acting as a legal rep.: corporation holds the shares in capacity of a legal representative, without a beneficial interests in the shares  A corp. can purchase or acquire or redeem its own shares ABCA, s.34(1), 35(1-2) & 36(1)  However, the purchase, acquisition or redemption of a corporation’s own shares is prohibited if the transaction would render the corporation insolvent ABCA ss. 34(2), 35(3) & 36(2) 24

o The test for solvency during an acquisition of a company’s own shares should be applied at the time the contract is made, as well as the time the contract is performed ( Nelson )  When is a corp insolvent? o Inability to pay its liabilities as they become due o Value of its assets is less than the aggregate of its liabilities and the amount to be paid for the shares CASES: McClurg v Canada : (husbands owned shares, received salaries but not dividends, wives owned shares, received dividends)  The rights carried by all shares to receive a dividend declared by a company are equal unless otherwise provided in the Articles of Inc.  The discretionary dividend clause is sufficient to rebut the presumption of equality amongst shares International Power v McMaster : (company had two classes of shares, common and preferred, but there was no provision for what happened to excess assets after all shares are paid off upon liquidation)  Treated equally Re Bowater Canadian Ltd. and RL Crain Inc . (provision in articles stating: o The special common shares held by C carry ten votes per share in the hands of C o But the shares shall carry only one vote per share in the hands of a potential transferee Court:  The rights are attached to the shares not the shareholder  Shares of the same class must have equal rights Jacobsen v United Canso Oil and Gas Ltd.: (Bylaw: no person shall be entitled to vote more than 1000 shares regardless of how many shares they owned)  Bylaw contravenes the Act Edmonton Country Club v Case : (provision in Articles that the BoD must consent to transfer of shares)  The provision is valid Neslson v Rentown Enterprises Inc .: (corp became insolvent after signing but before closing of land sale contract)  Test should be applied at the time of the contract but also at the time of performance Governance of the Corporation  Active participants: BoD, officers o Directors shall manage the business and affairs of a corporation , subject to a USA ABCA, s. 101(1) Qualifications of Directors ABCA, s. 105(1)  Persons disqualified from being a director ABCA s. 105(1) o Anyone who is less than 18 o Anyone who is of unsound mind and has been so found by a court in Canada or elsewhere  A person who has mental incapacity under the relevant statutes in AB o A person who is not an individual o A person who has the status of bankrupt  Directors are not required to hold shares, unless the articles otherwise provide ABCA, s.105(2) Number of Directors  Corp must have 1 or more directors  Distributing corporations must have not fewer than 3 directors, at least 2 of whom are independent; ABCA, s.101(2) 25

Residency Requirement  ABCA, s.105(3) - At least ¼ of the directors of a corporation must be resident Canadians Appointment of Directors  Notice of directors to be given to the Registrar at the time of incorporation; ABCA, s.106(1)  Each director in the notice holds the office from the issue until the first meeting of SHs ABCA, s.106(2)  After that, Directors are appointed at annual meeting of shareholders; ABCA, s.106(3)  Term of office may be staggered; ABCA, s.106(5) Election of Directors  Ordinary resolution of shareholders ; ABCA, s.106(3)  Directors may appoint additional directors, if allowed by Articles; ABCA, s.106(4) Removal of Directors  ABCA, s.109(1) – Can be removed at special meeting of shareholders ( ordinary resolution )  If the holders of any class or series of shares of a corporation have an exclusive right to elect one or more directors, a director so elected may only be removed by an ordinary resolution at a meeting of the shareholders of that class or series ABCA, s.109(2) Ceasing to Hold Office  A director of a corporation ceases to hold office when the director ABCA, s.108(1) o Dies or resigns o Is removed in accordance with s.109 o Becomes disqualified under subsection 105(1) Management Power Vested in Directors  Subject to any USA, the directors shall manage or supervise the management of the business and affairs of a corporation; ABCA, s. 101(1) o Shareholders cannot compel directors to alter the mandate of the directors at an ordinary meeting ( Automatic Self Cleaning )  shareholder tried to force the sale of company assets  Directors may delegate power to officers, except to do anything in 115(3); ABCA, s.121  Note : the directors’ power to delegate is subject to the articles, bylaws, or USA S.121 Shareholder’s Power Voting Power  At meeting of shareholders ABCA ss. 139-140 o Election and removal of directors, fundamental changes, etc. Shareholder Proposals ABCA, s.136  Promotes corporate democracy  Eligibility to submit a proposal o Shareholder must own  1% of voting shares, or shares worth at least $2000 for at least 6 months o Shareholders can pool their shareholding to meet the eligibility threshold  ABCA, s.136(1)&(1.1)  Exemptions; ABCA, s.136(5)  Prohibition of ‘general causes’ ABCA, s. 136(5)(b) o “primarily for the purpose of promoting general economic, political, racial, religious, social or similar causes”  Proposals are not binding on the corporation 26

Unanimous Shareholder Agreements (USA)  Contents of a USA; ABCA, s.146(1)  Effect of a USA; ABCA, s.146(7) Duha Printers  a USA is treated as a part of the corporate constitution. o Relieves directors of their powers, rights & duties  But not actually remove the directors. ( Doha Printers ) o Shareholders assume the powers, rights and duties of directors, directors not removed o Shareholders incur all liabilities of directors Fundamental Changes  Shareholders have the power to make fundamental changes to the corporation o Amendment of Articles o Amalgamation o Dissolution o Extraordinary sale, lease or exchange of company property  A special resolution is required (Need 2/3 approval) o ABCA, ss.173(1), 181-3, 190, 211 Remedial Powers  Power to seek liquidation or dissolution; A, s.215  Derivate Action; A, s.240  Oppression Remedy; A, s.242  Power to seek rectification of corporate records; A, s.244,  Power to seek a court order compelling directors to comply with the law; A, s.248 Fiduciary Duties – s. 122(1)(a) Nature and Scope of Fiduciary Duty  Every director and officer of a corporation shall act honestly and in good faith with a view to the best interests of the corporation ; ABCA, s.122(1)(a) What is “best interest of the corporation? o Should be read not simply as the best interests of the shareholders o Need to consider the interests of shareholders , employees , suppliers , creditors , consumers , governments and the environment ( BCE ) Peoples Dept. Stores v Wise  Thus, the directors and officers must o Avoid conflicts of interest with the corporation o Avoid abusing their position to gain a personal benefit o Maintain the confidentiality of information they acquire by virtue of their position o Serve the corporation selflessly, honestly, and loyally  The directors’ fiduciary duty does not change when a corporation is in the nebulous vicinity of insolvency  Directors do not owe a fiduciary obligation to creditors Fiduciary Duty Requires:  To not compete with the corporation (conflict of interest)  To not take or appropriate a corporate business opportunity for their own personal business  To not enter into a transaction with the corporation unless the nature of the director’s interest in the transaction is disclosed to the corporation 27

 Act fraudulently in relation to the corporation 1) Competition with the Corporation (Conflict of Interest)  Director cannot compete with a company while they are a director (directly or indirectly)  The determining factor is whether the director acted in the best interests of both corporations (Multiple Directorships)…might be impossible to serve both best interests!!! o Fiduciary duty involves a duty to avoid actual conflict, and potential conflict ( Sports Villas ) o An inquiry whether a director is competing with a company must take into account the full context of the circumstances ( Sports Villas ) CASE:  Sports Villas : (opening a golf course in a different city after informing the shareholders) o Director did not breach fiduciary duty  the new golf course was far enough and served different clientele 2) Disclosure of Interest in Material Contract  Duty: Disclosure of interest in material contract ABCA, s.120(1) o “D&O are obliged to disclose any interest they have in a material contract or material transaction with a corporation in which they serve” o Cannot enter into engagements in which he has a personal interest conflicting with interests of the corporation ( Aberdeen Railway )  even though director resigned, he had signed the contract while still a director of one company and a partner in another. Disclosure Requirements  The nature and extent of the director’s interest must be disclosed ; ABCA, s.120(1)&(5) o In writing o Or by requesting to have it entered in the minutes of meetings of the directors o In a timely manner ABCA, s.120(2)(3)(4)  A director required to make disclosure of interest cannot vote on a resolution to approve the contract or transaction except in limited circumstances ABCA, s.120(6) o If the Director’s other company is lending money to this corp o If the contract is related primarily to the director’s renumeration .  Disclosure of a director’s interest does not relieve the director of his duty to act honestly and in good faith with a view to the best interests of the corporation ( UPM-Kymmene Corp )  Billes failed to fulfill the disclosure requirement under the ABCA (despite acting in good faith) ( McAteer ) What is Material?  NOT defined in CBCA or ABCA  Denotes financial interest, has to be more than insignificant ( Dimo Holdings )  Whether the Director was to benefit more than de minimis ( Zysko )  Any personal relationship or monetary interest the director may have in the other side that might be thought to be an inhibiting factor is a material interest if disclosure of the relationship or interest might be relevant to the corporate decision whether to involve the particular manager in negotiations ( Prof. Welling ) Consequences for Failure to Disclose  Court may ABCA, s.120(9) o Set aside contract on any terms it sees fit ( Exide ) o Require the director or officer to account to the corporation for any profit or gain realized on the contract ( Exide ); o Or both  The corporation or any of its shareholders may apply to court for relief ABCA, s.120(9) 28

 NOTE: section 120 ABCA is subject to any USA; ABCA, s.120(10) Validity of Contract:  ABCA 120(8) - Despite non-disclosure, contract is valid If: o Disclosure is made in accordance with s.120 o The BoD or shareholders approve the contract after disclosure, and o The contract or transaction was fair and reasonable to the corporation when it was approved  Thus, the director or officer is not liable for the profits they make from the transaction Confirmation by Shareholders  Non-compliance of disclosure does not render the contract or transaction invalid if o The director acted honestly and in good faith ABCA, s.120(8.1) o The contract or transaction is approved or confirmed by special resolution at a meeting of the shareholders o NorthWest Transportation v. Beatty  Conditions Precedent ABCA, s.120(8.1)(b)&(c) o 1) Nature of the director’s interest must be sufficiently disclosed to the shareholders prior to their approval or confirmation o 2) The contract or transaction was reasonable and fair to the corporation when it was approved or confirmed CASES  Aberdeen Railway : (contract for supply of chairs was signed while director was a partner of the supplier, no disclosure, then he resigned his directorship) o Director’s fiduciary duty bars them from entering into engagements in which he has a personal interest conflicting with interests of the corporation (conflict of interest) o Contract set aside  Exide Canada : (director was in a relationship with secretary, who was owner of a company with which contract was signed, no disclosure) o Material interest/contract?  H had a material interest in Ryad by virtue of his personal relationship with P  Even when a director has no monetary interest in a person, but the negotiation involves a close personal friend of one of the directors, the transaction ought to be suspect o Breach?  H breached his fiduciary duty to Exide by not disclosing his connection to Ryad o H should account for profits  UPM : (director did a bunch of shit including: convincing the board to sign a new employment agreement for him with a severance of $27M, no disclosure, no good faith, hiding documents, etc..) o Berg ought to disclose the nature and extent of his interest in the contract o Disclosure of a director’s interest does not relieve the director of his duty to act honestly and in good faith with a view to the best interests of the corporation  McAteer : (Director of a company was also a trustee of a trust where her son was beneficiary, signed contract, did not disclose, even though she asked a friend to disclose) o Billes had a material interest in the contract even though she did not have a beneficial interest in the trust o Billes failed to fulfill the disclosure requirement under the ABCA (despite acting in good faith)  Duty is strict 29

3) Taking Corporate Opportunities  Directors and officers are not allowed to divert in their own favour business which should properly belong to the company they represent ( Cook )  Business opportunity belongs to the corporation even if there are some impediments to the corporation obtaining the opportunity ( Regal Hastings ) – i.e. even if it is impossible for the company to take that opportnity  When a company’s interest in a claim has ceased, and the directors are acting in good faith as members of the public, they can pursue that same claim ( Peso Silver )  Former directors cannot take corporate opportunities ( Canadian Aero ) 1- Where the resignation was prompted by a wish to acquire the opportunity, OR 2- It was their position with the company rather than a new initiative that led to the opportunity o Factors for determining whether the taking of a corporate opportunity is breach of fiduciary duty after resignation, consider:  Position or office held  The nature of the corporate opportunity  Its ripeness  Its specificity  the director’s relation to the opportunity  The amount of knowledge possessed  The circumstances in which it was obtained and whether it was special or even private  How much time elapsed since termination  How the relationship was terminated (by retirement, resignation, or discharge) CASES:  Cook v Deeks : (Directors negotiated a new contract on their behalf while still acting as directors) o Directors and officers are not allowed to divert in their own favour business which should properly belong to the company they represent o Must account  Regal Hastings : (Directors made investment, bought shares and made a profit, the company was not able to do the investment) o TEST : Shares, when acquired by the directors, were acquired by reason and only be reason of the fact that they were directors of the company. o Directors to account for profits  Peso Silver Mines : (Company was presented with opportunity, consulted a geologist, and considered the opportunity in good faith, then declined it. Directors later formed new company and took the opportunity) o DID NOT BREACH FIDUCIARY DUTY o Using the test from Regal Hastings: The transaction here was not made by reason of being directors, neither was it made in the course of execution of the office of the director o Reasons:  Pesos directors rejected the mining claims in good faith  Their decision was based partly on the professional advice of geologist  Company’s interest in the claims had ceased  Canadian Aero: (Directors worked for company for a while, then resigned and started a new company and submitted a bid for a government contract and won) o Fiduciary duty continues after resignation (see above) o Factors to be considered (see above) Duty of Care – s. 122(1)(b)  Directors and Officers must exercise the care , diligence and skill that a reasonably prudent person would exercise in comparable circumstances ABCA s. 122(1)(b) o Duty applies to creditors and other stakeholders ( Peoples Dept.)  Special Consideration: A director may give special, but not exclusive, consideration to the interests of those who elected or appointed the directors ABCA, s.122(4) 30

** because under the ABCA one class of shares are allowed to elect a director (if that is specified in the articles of incorporation)  Cannot contract out of statutory obligations ABCA, s.122 (3) o Subject to a USA Standard of Care  SOC: Directors and officers are not in breach of the duty of care if they acted prudently and on a reasonably informed basis ( Peoples Dept Store) o Look to all the circumstances that the D&O knew or ought to have known o Perfection is not demanded  If directors did not engage in any kind of analysis, they do not meet duty of care ( UPM )  It imposes a minimum standard of competence  Director must be diligent o Keep yourself informed about the affairs of the company o Attend board meetings o Monitor how the company is managed (you delegated your power to the managers) o Be generally familiar with the financial status of the company  Read audit reports o Ask questions and seek clarification CASES:  Peoples Dept : (directors of two companies issues a new distribution policy to address a business need, the result was that one company owed a lot of money to the creditor) o SOC above.. o The new policy was a reasonable business decision (BJR) o DoC is owed to creditors (unlike Fiduciary Duty) o ON  no DoC to Creditors  UPM : o They did not engage in any kind of analysis o It was unreasonable for the directors to approve an agreement with this provision when they Limitations and Defences  USA Defence (applies to both): Directors are relieved of their duties and liabilities if their powers have been transferred to the shareholders through a USA ABCA, s. 146(7) (but can’t contract out of duties )  Reliance Defence (applies to both): Can rely reasonably and in good faith on financial statements presented by an officer or auditor, or a report by a lawyer, accountant, engineer, etc. ABCA, s. 123(3)  Business judgment rule (BJR) (applies only to DoC ) o Directors and Officers are Not in breach of duty of care under s.122(1)(b) of the ABCA if they act prudently and on a reasonably informed basis  ( Peoples Dept Store)  Common Law Rule o Courts to defer to the business judgment when decision was made honestly, in good faith, prudently and on reasonable grounds ( CW Shareholdings ) o Should not be measured against hindsight – look at decision at the time it was made ( CW Shareholdings ) o Rule will not apply if the directors’ decision is uninformed ( UPM ) o Effect:  The BJR Shields reasonable business decisions from court intervention  Court will not second-guess corporate management 31

 Courts will not subject directors’ decisions to microscopic examination - CW Shareholdings CASES:  CW Shareholdings : (Directors consulted lawyers and financial experts to evaluate a higher TOB from Shaw and then accepted) o BJR shields business decisions which have been made honestly, prudently, in good faith, and on reasonable grounds o Should not be measured against hindsight – look at decision at the time it was made o Decision was informed Indemnification of Directors  Corps may indemnify Directors against all costs, charges, and expenses of legal proceedings ABCA, s.124(1)  To be entitled, directors must have o [1] Civil Suit: Acted honestly and in good faith with a view to the best interests of the corporation, and o [2] In criminal or admin proceedings , had reasonable grounds for believing that their conduct was lawful ( this is to protect the rights of other parties )  ABCA, s.124(1); CBCA, s.124(3)&(5)  Right to indemnity in certain circumstances ABCA, s. 124(3)  May apply to court for an order approving the indemnity ABCA, s.124(1) SHAREHOLDER REMEDIES Choosing between Derivative Action and Oppression  Oppression is a personal claim o Must demonstrate unique personal harm o Must affect complainant in in a manner than is different than to the other shareholders  Derivative action is brought in the name of the company o Corporation as a whole is harmed by the wrongdoing o Wrong to shareholders is indirect in that it is the result of harm to the corporation  NOTE that claims are not mutually exclusive Derivative Action Content ABCA, s. 239-241  Enforce Fiduciary Duty and Duty of Care when Directors unwilling to do so themselves  S. 240(1): A complainant may apply to the Court for permission to:  Sue in the name of the corporation to enforce a corporate claim ABCA, s. 239-241 o Action must be in name of the corporation, not an individual ( Hercules Management ) o Cannot have the shareholder name on the list of plaintiffs ( RLTV Investments ) o May be the basis for liability to other stakeholders in accordance with principles governing the law of tort and extra contractual liability ( BCE )  Intervene in an action to prosecute or defend the action on behalf of the corporation 1) Is the person a Complainant?  A registered holder or beneficial owner , and a former registered holder or beneficial owner, of a security of a corporation or any of its affiliates ABCA, s.239(b)  A director or an officer or a former director or officer of a corporation or any of its affiliates  A Creditor ( under the ABCA only )  Any other person who, in the discretion of the court, is a proper person 32

o ( First Edmonton Place ) TEST : o there is evidence that the directors committed a fraud on the corporation o Because the corporation is liable to the applicant (Lessee) , the applicant is a proper person for the purpose of a derivative action (i.e. the directors committed wrong towards the Corp) 2) Do they have Leave of Court To be entitled to leave, a complainant must: Proper Notice?  Give notice to the directors of the corporation or its subsidiary of the complainant’s intention to apply to the court (ABCA requires “ reasonable notice ”) s. 240(2) & (3), CBCA requires 14 days minimum o Failure to specify each and every cause of action in a notice does not invalidate the notice as a whole ( Bellman )  Bellman Good Faith?  Be acting in good faith; and ABCA, s.240(2)(b)  TEST : o ( O’Fearghail Holdings ) Good faith would be absent if it appeared the applicants did not truly believe there was merit to the cause they wish to pursue  A justifiable delay, in bringing the action, or being an afterthought, does not constitute bad faith o ( Bellman ) Applicant needs to show that there is an arguable case  O’Fearghail holdings  Bellman In the interest of the corporation?   Show that it appears to be in the interests of the corporation or its subsidiary that the action be brought, prosecuted, defended, or discontinued ABCA, s.240(2)(c)  TEST : Show that there is an arguable case that is in the interest of the company ( Bellman ) o It is not a requirement that the notice must specify all of the legal bases for the claim  O’Fearghail holdings  Bellman Powers of Court in Derivative Action  ( ABCA, s.241)  An order authorizing the complainant or any other person to control the conduct of the action  An order giving directions for the conduct of the action  An order directing that any amount adjudged payable by a defendant in the action shall be paid, in whole or in part, directly to former and present security holders of the corporation or its subsidiary instead of to the corporation or its subsidiary; and  An order requiring the corporation or its subsidiary to pay reasonable legal fees CASES:  OFearghail : (Delay of 4 years in Derivative action) o Delay doesn’t necessarily indicate bad faith, it was explained o Good Faith Test above 33

 Bellman : (Derivative action over insider trading – claimed that one ground in petition was not in the notice) o Good Faith Test above o Notice requirement above  RLTV Investments : (Derivative action with more than one plaintiff, shareholder included) o Cannot have shareholder name in the list of plaintiffs Oppression Remedy  [1] S. 239, Complainant may apply to a court DIRECTLY for an order under this section  [2] S. 242(1)-(2) If, on an application under subsection (1), the Court is satisfied that in respect of a corporation or any of its affiliates that o (a) Any act or omission of the corporation or any of its affiliates affects a result o (b) The business or affairs of the corporation or any of its affiliates are or have been carried on or conducted in a manner, or o (c) The powers of the directors of the corporation or any of its affiliates are or have been exercised in a manner  is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer (only one needs to be found, definitions in the BCE case) Then:  [3] The court may make an order to rectify the matters complained of ABCA, s.242(3) o ABCA 242; CBCA, s.241  Shareholder’s approval of the act/omission/conduct complained of does not defeat an oppression remedy suit or a derivative suit - However, the court may take such approval into consideration in making an order ABCA, s.243(1) Content  The oppression remedy protects against unfair actions, but not against unreasonable expectations of advantage ( Westfair Foods )  Imposes a general standard of fair conduct on the corporation , directors, officers, and SHs  Often, the oppressive conduct complained of is the conduct of the corporation or if its directors, who are responsible for the governance of the corporation ( BCE ) o However, the conduct of other actors, such as shareholders, may also support a claim for oppression ( BCE ) 1) Is the person a Complainant?  See above for criteria in Act  A lessor is not a creditor, because a lease is not a security ( First Edmonton Place ) o They might be if there is rent owning under the lease at the time of the action  Is the person a proper person to make an application?  TEST: ( First Edmonton Place ) An applicant must show (with some proof) that the act or conduct constitutes: o Using the corporation as a vehicle for committing fraud upon the applicant o A breach of the underlying expectation of the applicant arising from the circumstances in which the applicant’s relationship with the corporation arose ** not an exhaustive list 2) Determining Oppression: The Two-Step Approach BCE v 1976 Debentureholders 34

1) Reasonable Expectation (objective and contextual)  Is there any?  Is it breached?  Factors useful in determining reasonable expectation (non-exhaustive) o SHs have reasonable expectation that directors comply with statutory duties o Articles?? o General commercial practice  A departure from normal business practices that has the effect of undermining or frustrating the complainant’s exercise of his or her legal rights o Nature of the corporation  The size, nature, and structure of the corporation  Courts may give more latitude to the directors of small, closely held corps o Relationship between the parties  Between shareholders based on ties of family or friendship may be governed by different standard than relationships between arm’s length shareholders o Past practice  Especially among shareholders of a closely held corporation  But it is accepted that practices and expectations can change over time o Steps the claimant could have taken to protect itself  Whether claimant took steps protect itself against the prejudice it claims o Representations and agreements  Promotional material, prospectuses, offering circulars, etc o The fair resolution of conflicting interests between corporate stakeholders  Directors of the corporation to resolve them in accordance with their fiduciary duty to act in the best interests of the corporation, viewed as a good corporate citizen 2) If breach, does it amount to oppression , unfair prejudice , or unfair disregard ?  If a breach of a reasonable expectation is established, one must go on to consider whether the conduct complained of amounts to oppression, unfair prejudice, or unfair disregard s. 242(2) Meaning of Oppressive/Unfair/Prejudicial Conduct BCE v 1976 Debentures – j ust prove one  Oppression : coercive or abusive conduct/bad faith (fact-specific) – highest standard  Unfairly prejudicial : conduct with unfair consequences o Squeezing out a minority shareholder o Failing to disclose related party transactions o Changing corporate structure to alter debt ratios o Adopting a poison pill to prevent a takeover bid o Paying dividends without a formal declaration o Preferring some shareholders with management fees and paying directors’ fees higher than industry norm  Unfair disregard : Ignoring a complainant’s interest as being of no importance o Favouring a director by failing to properly prosecute claims, improperly reducing a shareholder’s dividend, or failing to delivery property belonging to the claimant Indicia of Oppressive/Unfair/Prejudicial Conduct  Two key factors ( Re Ferguson & Imax ): o 1) The relationship between the shareholders o 2) The bona fides of the corporate transaction in question (is there a valid corporate transaction…not just a means to oust a director) 35

 Failure on the part of the corporation and its controlling shareholders to take reasonable steps to simulate an arm’s length transaction  Lack of good faith on the part of the directors of the corporation  Discrimination between shareholders with the effect of benefitting the majority shareholder to the exclusion or to the detriment of the minority shareholder  Lack of adequate and appropriate disclosure of material information to the minority SHs  A plan or design to eliminate the minority shareholder o Arthur v Signum Communications 3) Remedy for Oppression – ALWAYS INCLUDE DISCUSSION ABOUT THIS  Court may only order rectification, but it can be achieved through various means  Court may make an order to rectify the matters complained of ABCA, s.242(2-3) o But only to rectify, not to punish ( Neneff ) o Can’t be used to advance personal interests ( Neneff )  The court may make any order it thinks fit including an order o Restraining the conduct complained of o Appointing a receiver or receiver-manager o To amend the company’s articles or bylaws o To purchase securities of a securities holder (Naneff) o Setting aside a contract or transaction o Compensating an aggrieved person o Liquidating or dissolving the corporation o Directing an investigation that o Requiring the trial of any issue o Granting leave to bring a derivative action (court can split matters between oppressive actions and derivative actions) ABCA, s. 243(3)(q)  However, the remedy must not be punitive ( Naneff )  Any rectification of a matter complained of can only be made with respect to the complainant’s interest as a shareholder, creditor, director or officer punitive ( Naneff ) CASES:  First Edmonton Place : (3 lawyers signed lease as directors of company, paid a little then did not pay the rest, vacated the premises, and paid themselves the money out of the corp leaving the corp owing money to thelandlord) o A lease is not a security o Test for proper person…see above o Granted leave to bring derivative action o NOTE: In an oppression remedy suit, the court can grant leave to commence a derivative action o ABCA, s.242(3)(q)  Westfair Foods : (two classes of shares, one only get $2 dividends, the company issues all profits as dividends) o [1] No reasonable expectation here : The expectation that the company would retain the surpluses was an unreasonable expectation - Because the rights granted to the shares were in the articles. o [2] The new dividend policy does not amount to oppression , unfair prejudice, or unfair disregard  Re Ferguson : (Husband trying to squeeze out his ex-wife from the company – including issuing resolution to convert her shares to redeemable) o In determining whether there is oppression in a close corporation , look to  The relationship between the shareholders 36

 The bona fides of the corporate transaction in question (is there a valid corporate transaction)  UPM : o The process by which the agreement was negotiated and approved, and the terms of the agreement unfairly disregarded the interests of the TDAM and other shareholders o Remedy in this case was to set aside the agreement  BCE : (Bell Debenture holders sued because their investment-grade debentures got devalued by CW’s business moves) o The two-part test o All the stuff above  Naneff : (Angry dad with voting shares kicked his son out of the corp) o Court Rectification cannot be punitive o The proper remedy is that the App’s should acquire Alex’s shares of the companies at fair market value - This remedy would protect A’s interest as a shareholder Remedy: Personal Liability of Directors  Directors may be personally liable for oppressive conduct where: — 1. the oppressive conduct is attributable to the directors, and — 2. the imposition of personal liability fits the circumstances.  See Wilson v. Alharayeri , 2017 SCC 39 [paras. 47 & 48] 37