Amaranth L.L.C. v. Counsel Corporation [Indexed as: Amaranth L.L.C. v. Counsel Corp.]

71 O.R. (3d) 258

[2004] O.J. No. 2091

Docket Nos. M30942 and C40863

Court of Appeal for Ontario

Laskin, Simmons and Cronk JJ.A.

May 20, 2004

Appeal -- Jurisdiction -- Court of Appeal -- Court of Appeal not having jurisdiction to hear appeal from order dismissing application for relief under s. 248 of Ontario Business Corporations Act ("OBCA") on ground that applicant did not have standing to sue because of terms of trust indenture -- Appeal lying to Divisional Court under s. 255 of OBCA -- Issue of standing to sue being integral to entitlement to relief under s. 248 -- Dismissal of application for relief from oppression constituting order made under power expressly conferred by OBCA -- Reason for dismissal not depriving Divisional Court of jurisdiction to hear appeal -- Business Corporations Act, R.S.O. 1990, c. B.16, ss. 248, 255.

Corporations -- Oppression -- Practice -- Appeal -- Court of Appeal not having jurisdiction to hear appeal from order dismissing application for relief under s. 248 of Ontario Business Corporations Act ("OBCA") on ground that applicant did not have standing to sue because of terms of trust indenture -- Appeal lying to Divisional Court under s. 255 of OBCA -- Issue of standing to sue being integral to entitlement to relief under s. 248 -- Dismissal of application for relief from oppression constituting order made under power expressly conferred by OBCA -- Reason for dismissal not depriving Divisional Court of jurisdiction to hear appeal -- Business Corporations Act, R.S.O. 1990, c. B.16, ss. 248, 255.

The applicant held debentures issued by the respondent under a trust indenture. When the respondent sought to exercise its option to convert its debentures to common shares, the applicant applied under s. 248 of the Ontario Business Corporations Act ("OBCA") for an injunction to prevent the conversion and for a declaration that the respondent's notice was defective. On a preliminary motion by the respondent, the application judge held that the applicant did not have standing to sue, as the trust indenture permitted only the trustee to take legal proceedings. The applicant appealed to the Court of Appeal. The respondent brought a motion to quash the appeal.

Held, the motion should be granted.

Because the application judge's order dismissed the applicant's application for relief under s. 248 of the OBCA, on a plain reading of s. 255 of the OBCA, the applicant's appeal lay to the Divisional Court. The applicant's appeal route did not change simply because the applicant's right to seek relief under s. 248 depended on the interpretation of the trust indenture. The applicant's standing to sue was not decided in a separate proceeding; it was integral to its entitlement to relief under s. 248. The application judge's determination of the applicant's standing to sue was not an interlocutory order made under a different statute along the way to deal with the application for an oppression remedy. It is not the case that an appeal lies to the Divisional Court only in respect of the exercise of a power under the OBCA. Even if s. 255 only applies to appeals from orders made under a power expressly conferred by the OBCA, the order of the application judge was such an order. The dismissal of the applicant's application for relief from oppression was an order made under a power expressly conferred by the OBCA, the power to adjudicate on an application under s. 248. The reason for dismissal -- the interpretation of the trust deed -- did not deprive the Divisional Court of jurisdiction to hear the appeal.

MOTION to quash an appeal from the judgment of Ground J. of the Superior Court of Justice dated October 28, 2003.

Casurina Limited Partnership v. Rio Algom Ltd., 2004 30309 (ON CA), [2004] O.J. No. 177, 181 O.A.C. 19, 40 B.L.R. (3d) 112 (C.A.), affg (2002), 2002 9356 (ON SC), 28 B.L.R. (3d) 44 (Ont. S.C.J.); Kelvin Energy Ltd. v. Lee, 1992 38 (SCC), [1992] 3 S.C.R. 235, 97 D.L.R. (4th) 616, 143 N.R. 191, [1992] S.C.J. No. 88 (sub nom. Loewen, Ondaatje McCutcheon & Co. v. Sparling), consd Other cases referred to 1153238 Ontario Ltd. v. Durbano, [2002] O.J. No. 1363 (C.A.); Jabalee v. Abalmark Inc., [1996] O.J. No. 2609 (C.A.) Statutes referred to Business Corporations Act, R.S.O. 1990, c. B.16, ss. 1, 248, 255 Canada Business Corporations Act, R.S.C. 1985, c. C-44, s. 249 Code of Civil Procedure, R.S.Q., c. C-25.1 Courts of Justice Act, R.S.O. 1990, c. C.43, s. 6

Fred L. Myers and Suzy Kauffman, for moving party. Patricia D.S. Jackson and Linda M. Plumpton, for responding party.

The judgment of the court was delivered by

LASKIN J.A.: --

A. Introduction

[1] The issue on this motion to quash is whether Amaranth L.L.C.'s appeal lies to this court or to the Divisional Court.

[2] Amaranth held debentures issued by Counsel Corporation under a trust indenture. When Counsel sought to exercise an option under the indenture to convert the debentures to common shares, Amaranth applied for relief under the oppression remedy provisions of the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 ("OBCA").

[3] Ground J. dismissed the application. He held that because the trust indenture permitted only the trustee to take legal proceedings, Amaranth had no standing to sue. Amaranth appealed to this court, and to protect its position, also to the Divisional Court. Counsel, the moving party on this motion, contends that Amaranth's appeal lies to the Divisional Court. It relies on s. 255 of the OBCA, which provides: "An appeal lies to the Divisional Court from any order made by the court under this Act." Amaranth contends that its appeal lies to this court. It relies on the basis on which Ground J. dismissed its application: the interpretation of a contract, not the exercise of a power under the OBCA.

[4] I would resolve this debate in favour of the moving party. In my view, Amaranth's appeal should go to the Divisional Court.

B. Discussion

[5] The proceeding before Ground J. arose when Counsel gave notice that it intended to exercise its option to convert its debentures to common shares. Amaranth applied under s. 248 of the OBCA for an injunction to prevent the conversion and for a declaration that the notice was ineffective. On the return of the application, Counsel brought a preliminary motion to determine whether Amaranth had standing to sue. Ground J. concluded that an individual debenture-holder had no standing to sue counsel. He relied on two provisions of the trust indenture, which provided that legal proceedings affecting the rights and remedies of a debenture-holder had to be brought by the trustee on behalf of all of the debenture-holders. Because he concluded that Amaranth had no standing to sue, he dismissed its application for relief from oppression.

[6] The legislature has directed that appeals from orders under the OBCA lie to the Divisional Court. This is evident from a reading of s. 6(1)(b) of the Courts of Justice Act, R.S.O. 1990, c. C.43 and s. 255 of the OBCA. Section 6(1)(b) describes this court's jurisdiction to hear appeals from a final order of a Superior Court judge:

6(1) An appeal lies to the Court of Appeal from,

(b) a final order of a judge of the Superior Court of Justice, except an order referred to in clause 19(1)(a) or an order from which an appeal lies to the Divisional Court under another Act

(Emphasis added)

Section 255 of the OBCA invokes one of the exceptions in s. 6(1)(b) of the Courts of Justice Act:

255. An appeal lies to the Divisional Court from any order made by the court under this Act.

Court is defined in s. 1(1) of the OBCA to mean the Superior Court of Justice.

[7] Ground J.'s order is a final order of a Superior Court judge. Because his order dismissed Amaranth's application for relief under s. 248 of the OBCA, on a plain reading of s. 255 of the OBCA, Amaranth's appeal lies to the Divisional Court. Amaranth's appeal route does not change simply because Amaranth's right to seek relief under s. 248 depended on the interpretation of the trust indenture. Amaranth's standing to sue was not decided in a separate proceeding; it was integral to its entitlement to relief under s. 248. Lacking standing, its claim for relief under the OBCA could not succeed and its application under that Act was dismissed.

[8] Amaranth makes two arguments in support of its position that its appeal properly lies to this court. First, it argues that an appeal lies to the Divisional Court only in respect of the exercise of a power under the OBCA. As its appeal does not concern the exercise of a statutory power, but instead concerns a general question of contract interpretation, Amaranth submits that this court has jurisdiction to hear it. In support of this argument it relies on the decision of the Supreme Court of Canada in Kelvin Energy Ltd. v. Lee, 1992 38 (SCC), [1992] 3 S.C.R. 235, [1992] S.C.J. No. 88. Second, Amaranth argues that in several cases similar to this one this court has assumed jurisdiction to hear the appeal. I do not agree with either argument.

[9] The decision in Kelvin arose out of an application for an oppression remedy under the Canada Business Corporations Act, R.S.C. 1985, c. C-44 ("CBCA"). The parties negotiated a settlement, which, under the CBCA, had to be approved by the court. The Director under the CBCA, who had been added as a party to the proceedings, expressed concern about the settlement and obtained a court order to examine two witnesses. That order was made under the Quebec Code of Civil Procedure, R.S.Q., c. C-25, whose rules expressly apply in oppression proceedings under the CBCA. The order for discovery was appealed and the Director moved to quash the appeal on the ground that the order was not appealable as of right.

[10] The CBCA contains an appeal provision, s. 249, almost identical to s. 255 of the OBCA. Thus, the Supreme Court had to decide whether the order for discovery was an "order made by a court . . . under this Act". The Supreme Court held that it was not. L'Heureux-Dubé J. wrote, at p. 258 S.C.R., that the scope of s. 249 of the CBCA was limited "to those judgments arising from a power specifically conferred by the Canada Business Corporations Act, to the exclusion of the variety of interlocutory decisions made under the Code of Civil Procedure". This result was driven by an important policy consideration: furthering the statute's primary objective of giving a fast and effective remedy to shareholders vulnerable to oppression, an objective that would be defeated were interlocutory orders such as the one in issue appealable as of right.

[11] However, even accepting that Kelvin supports the proposition that s. 255 of the OBCA applies only to appeals from orders made under a power expressly conferred by that statute, the order of Ground J. is such an order. Ground J. dismissed Amaranth's application for relief from oppression. That dismissal is an order made under a power expressly conferred by the OBCA, the power to adjudicate on an application under s. 248. The reason for the dismissal -- the interpretation of the trust deed -- does not deprive the Divisional Court of jurisdiction to hear Amaranth's appeal. On applications under s. 248 the court routinely interprets contractual terms.

[12] Ground J.'s interpretation of the trust indenture and his ruling on standing were fundamental to his disposition of the application. His determination of Amaranth's standing to sue was not an interlocutory order made under a different statute along the way to dealing with the application for oppression, as was the case in Kelvin. Indeed, it would be an anomalous result if the issue of standing were to be hived off and appealable only to this court, while the underlying merits of s. 248 proceedings were appealable to the Divisional Court. The legislature could not have intended this result. As I view it, Kelvin does not assist Amaranth.

[13] Admittedly, in a few cases, this court has heard and decided appeals in connection with proceedings under the OBCA: see for example Casurina Limited Partnership v. Rio Algom Ltd., 2004 30309 (ON CA), [2004] O.J. No. 177, 181 O.A.C. 19 (C.A.); 1153238 Ontario Ltd. v. Durbano, [2002] O.J. No. 1363 (C.A.); and Jabalee v. Abalmark Inc., [1996] O.J. No. 2609 (C.A.).

[14] The case most directly on point is Casurina, also an application under the oppression provisions of the OBCA. Like Ground J., the application judge in that case, Spence J., held that the appellant, a debenture-holder, had no standing to sue under the governing trust indenture. He therefore dismissed the application for relief under s. 248 of the OBCA. He then went on, in obiter observations, to address some of the merits of the s. 248 application. Feldman J.A. wrote for the panel dismissing the appeal. She made no comment on this court's jurisdiction to hear the appeal.

[15] I do not view Casurina or the other cases cited by Amaranth to be helpful in resolving this motion to quash. Whether for tactical or other reasons, in none of these cases did counsel raise the question of this court's jurisdiction, and therefore in none of them did this court consider whether it had jurisdiction.

[16] In my view, Amaranth's appeal lies to the Divisional Court. I would grant the motion to quash and transfer this proceeding to the Divisional Court. Counsel is entitled to its costs of this motion, which I would fix at $3,500 inclusive of disbursements and GST.

Motion granted.