Court File No. 529/06

Released: 20061103

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Re: ROBERT McEWEN (Applicant/Appellant)

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GOLDCORP INC. AND GLAMIS GOLD LTD. (Respondents)

Before: Carnwath, E. Macdonald and Swinton JJ.

Counsel: Joseph Groia, Gavin Smyth and Cullen Price for the Appellant

William Burden and Lorne S. Silver for the Respondent Goldcorp Inc.

Mark Gelowitz and Laura K. Fric for the Respondent Glamis Gold Ltd.

Heard at Toronto: November 1, 2006

ENDORSEMENT

[1] Robert McEwen appeals the decision of Pepall J. dated October 24, 2006 dismissing his application to require Goldcorp Inc. to obtain shareholder approval for a transaction with Glamis Gold Ltd.

[2] The central issue in this appeal is whether the transaction is an “arrangement” to which s. 182 of the Business Corporations Act, R.S.O. 1990, c. B.16 (the “OBCA”) applies, so that Goldcorp is required to obtain shareholder approval of the transaction.

[3] Section 182(1) defines an “arrangement” in the following terms:

In this section,

“arrangement”, with respect to a corporation, includes,

(a) a reorganization of the shares of any class or series of the corporation or of the stated capital of any such class or series,

(b) the addition to or removal from the articles of the corporation of any provision that is permitted by this Act to be, or that is, set out in the articles or the change of any such provision,

(c) an amalgamation of the corporation with another corporation,

(d) an amalgamation of a body corporate with a corporation that results in an amalgamated corporation subject to this Act,

(e) a transfer of all or substantially all the property of the corporation to another body corporate in exchange for securities, money or other property of the body corporate,

(f) an exchange of securities of the corporation held by security holders for other securities, money or other property of the corporation or securities, money or other property of another body corporate that is not a take-over bid as defined in Part XX of the Securities Act,

(g) a liquidation or dissolution of the corporation,

(h) any other reorganization or scheme involving the business or affairs of the corporation or of any or all of the holders of its securities or of any options or rights to acquire any of its securities that is, at law, an arrangement, and

(i) any combination of the foregoing.

[4] Pursuant to s. 182(2), a corporation “proposing an arrangement” shall prepare a statement for shareholders setting out the detail of what is proposed to be done and the proposed manner for doing it. The remainder of the section provides for a vote by shareholders and court supervision of the process and approval of the arrangement following shareholder approval.

[5] Both Goldcorp and Glamis are producers of gold, and their shares on traded on the Toronto Stock Exchange and the New York Stock Exchange. They have agreed that Goldcorp will acquire the shares of Glamis as follows:

1. Glamis will obtain shareholder and court approval of a plan of arrangement pursuant to the British Columbia Business Corporations Act, S.B.C. 2002, c. 57 (the “BCBCA”).

2. Goldcorp is to issue 1.69 common shares of Goldcorp plus nominal cash in exchange for each Glamis share.

3. An amalgamation will follow, either through an amalgamation of Glamis and a Goldcorp subsidiary pursuant to the BCBCA, or through the continuation of Glamis under the OBCA and amalgamation of Goldcorp and Glamis under the vertical short form amalgamation provision in s. 177(1) of the OBCA.

After completion of the transaction, current Goldcorp shareholders will own approximately 60% of Goldcorp shares and current Glamis shareholders will own 40%.

[6] The application judge held that an arrangement must be “proposed” by the corporation, and that Goldcorp did not “propose” an arrangement within the meaning of s. 182 of the OBCA. She found that the parties intended to effect an arrangement of Glamis under the arrangement provisions of the BCBCA. She concluded that Goldcorp, while complying with the OBCA, did not attract the imposition of s. 182.

[7] The appellant submits that the application judge erred in holding that an arrangement must be “proposed” by the corporation to attract s. 182. It is alleged that she failed to recognize that Goldcorp chose to propose this transaction as a plan of arrangement. Moreover, she erred in failing to consider that, in substance, the transaction effects a fundamental change of Goldcorp and is, therefore, an arrangement.

[8] More particularly, the appellant submits that when the transaction is regarded as a single integrated transaction, Goldcorp has proposed an arrangement with Glamis in which Goldcorp and Glamis amalgamate. If there is a vertical amalgamation of Goldcorp and Glamis, s. 182(1)(c) applies. If there is a three-cornered amalgamation between Glamis and a new Goldcorp subsidiary, there is, in essence, an amalgamation between Glamis and Goldcorp, and s. 182(1)(d) applies. Finally, the transaction is a reorganization or scheme within s. 182(1)(h).

[9] The standard of review with respect to the application judge’s interpretation of s. 182 of the OBCA is correctness. However, the appellant appears to take issue with respect to some of her findings of fact, as well. In reviewing findings of fact, an appellate court will not intervene unless there has been palpable and overriding error (Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235 at paras. 8 and 10).

[10] The application judge correctly held that a corporation must propose a plan of arrangement to attract s. 182 – that is, the section is facilitative and not mandatory. The words “proposing” and “proposed” in subsections 182(2) and (6) indicate that a corporation must choose to rely on the arrangement provision.

[11] Moreover, the interpretation suggested by the appellant – that s. 182 must be used if a transaction falls within the definition of an “arrangement” in s. 182(1) – would render other provisions of the OBCA superfluous. That can not have been the intention of the Legislature. Sections 174 to 177 provide procedures by which two corporations may amalgamate. Specifically, ss. 174 to 176 permit two corporations to amalgamate upon obtaining two thirds approval of their shareholders. No court approval is required. Section 177 requires neither shareholder nor court approval if one amalgamating corporation is a wholly-owned subsidiary of the other, or where both amalgamating corporations are wholly-owned subsidiaries of the same parent corporation.

[12] Finally, the words of s. 182(6) contemplate that there will be transactions that could be proposed as arrangements, but which can also be lawfully implemented under other provisions of the OBCA. It reads:

(6) Where a reorganization or scheme is proposed as an arrangement and involves an amendment of the articles of a corporation or the taking of any other steps that could be made or taken under any other provision of this Act, the procedure provided for in this section, and not the procedure provided for in such other provision, applies to such reorganization or scheme.

[13] The application judge made a number of findings of fact and mixed fact and law. She found that the only arrangement being proposed was that proposed by Glamis under the BCBCA. She also found that the transaction proposed by Goldcorp was an issuance of its shares to the shareholders of Glamis, and she concluded that there were no legal impediments to the issuance of the Goldcorp shares. Section 23(1) of the OBCA authorizes the directors to issue shares at such time and to such persons and for such consideration as the directors may determine, subject only to restrictions that may be contained in the constating documents. Goldcorp’s constating documents contain no restrictions on share issuance, and its authorized capital consists of an unlimited number of common shares.

[14] The application judge went on to find that s. 182 was not applicable to the amalgamation in Stage Two of the transaction for reasons set out in paragraph 37 of her decision:

In my view, the transaction is not subject to section 182. To the extent that Goldcorp is amalgamating with another corporation, this occurs when Glamis is a wholly owned subsidiary of Goldcorp and, by virtue of section 177(1), such an amalgamation is exempt from shareholder approval. Goldcorp is not issuing shares in connection with the short-form amalgamation. The fact that some of the elements of a multi-stage transaction could have been structured by way of an arrangement is insufficient for the transaction to be subject to section 182. Section 182(1)(c) is inapplicable. The same is true with respect to section 182(1)(d) which addresses an amalgamation of Goldcorp with a non OBCA corporation. The only amalgamation contemplated in this transaction is between two OBCA corporations as part of the vertical short-form amalgamation. As to section 182(1)(h), I am hard pressed to see how the issuance of shares of an existing authorized class constitutes a reorganization or scheme affecting the holders of securities. Goldcorp will continue to conduct its business as it was conducted prior to the completion of the transaction and its shareholders will continue to hold shares with the same rights, privileges and conditions as existed prior to the transaction. Furthermore a reorganization of Glamis does not amount to a reorganization of Goldcorp. It follows that section 182(1)(i) is therefore also inapplicable.

[15] The application judge was correct in her interpretation of s. 182 of the OBCA, and the appellant has failed to show any palpable and overriding error in her findings of fact. Therefore, the appeal is dismissed.

[16] If the parties cannot agree on costs, the respondents may make written submissions within 21 days of the release of this decision, and the appellant may make responding submissions within 14 days thereafter.

Carnwath J.

E. Macdonald J.

Swinton J.

Released: November 3, 2006