sparling v. québec (caisse de dépôt et placement du québec), [1988] 2 S.C.R. 1015
La Caisse de dépôt et placement du Québec Appellant
v.
Frederick H. Sparling Respondent
and
The Attorney General of Quebec and the Attorney General for Alberta Interveners
indexed as: sparling v. quebec (caisse de dépôt et placement du québec)
1988: February 4; 1988: December 15.
Present: Beetz, Estey*, McIntyre, Lamer, Wilson, Le Dain* and La Forest JJ.
on appeal from the court of appeal for quebec
Crown ‑‑ Immunity ‑‑ Provincial Crown agent purchasing shares of a corporation governed by federal statute ‑‑ Agent refusing to submit insider report as required by federal statute ‑‑ Whether agent bound by insider reporting provisions ‑‑ Application of the benefit/burden exception to Crown immunity ‑‑ Canada Business Corporations Act, S.C. 1974‑75‑76, c. 33, s. 122(2), (4) ‑‑ Interpretation Act, R.S.C. 1970, c. I‑23, s. 16.
Appellant, an agent of the Crown in right of Quebec, purchased more than 10 per cent of the shares of a company governed by the Canada Business Corporations Act and so became an insider of that company for the purposes of ss. 121 and 122 of the Act. It nevertheless refused to submit an insider report to the respondent contending that, by virtue of Crown immunity as provided by s. 16 of the federal Interpretation Act, it was exempt from the application of subss. 122(2) and (4). Section 16 provided that "No enactment is binding on Her Majesty . . . except as therein mentioned or referred to". Respondent sought a declaration from the Superior Court that the appellant was bound by the provisions of the Canada Business Corporations Act relating to the rights and obligations of shareholders and that it was thus required to produce the insider report. The Superior Court dismissed respondent's motion holding that s. 16 of the Interpretation Act rendered subss. 122(2) and (4) inapplicable with respect to the appellant. The Court of Appeal reversed the judgment.
Held: The appeal should be dismissed.
The insider reporting provisions of the Canada Business Corporations Act applied to the appellant. Although the Act did not "mention or refer" to the Crown in the sense required by s. 16 of the Interpretation Act, appellant, by purchasing shares, implicitly accepted the benefits of the statute and chose to bring itself within the purview of the law relating to shareholders. The Crown could not accept the benefit of the law without also incurring its burdens.
The application of the benefit/burden exception to Crown immunity does not result in subsuming the Crown under any and every regulatory scheme that happens to govern a particular state of affairs. Its application depends not upon the existence or breadth of a statutory scheme regulating an area of commerce or other activity, but upon the relationship or nexus between the benefit sought to be taken from a statutory or regulatory provision and the burdens attendant upon that benefit. The focus is not on the source of the rights and obligations but on their content, their interrelationship. In this case, the interrelationship between the rights and obligations acquired by the purchaser of a share was so close both conceptually and historically that there could be no question of the application of the benefit/burden exception. A share is not an entity independent of the statutory provisions that govern its possession and exchange. Those provisions define the very rights and liabilities that constitute the share's existence. The Crown, when it purchases a share of a company to which the Canada Business Corporations Act applies, is thus bound by the entirety of the Act in so far as it defines and regulates the rights and obligations of shareholders.
Cases Cited
Referred to: Her Majesty in right of the Province of Alberta v. Canadian Transport Commission, 1977 CanLII 150 (SCC), [1978] 1 S.C.R. 61; The Queen v. Murray, 1967 CanLII 49 (SCC), [1967] S.C.R. 262; Crooke's Case (1691), 1 Show. K.B. 208, 89 E.R. 540; The Queen v. Board of Transport Commissioners, 1967 CanLII 93 (SCC), [1968] S.C.R. 118; Toronto Transportation Commission v. The King, 1949 CanLII 35 (SCC), [1949] S.C.R. 510; R. v. Eldorado Nuclear Ltd., 1983 CanLII 34 (SCC), [1983] 2 S.C.R. 551; R. v. Ouellette, 1980 CanLII 9 (SCC), [1980] 1 S.C.R. 568; Province of Bombay v. Municipal Corporation of Bombay, [1947] A.C. 58; Multiple Access Ltd. v. McCutcheon, 1982 CanLII 55 (SCC), [1982] 2 S.C.R. 161; Bank of Montreal v. Bay Bus Terminal (North Bay) Ltd. (1971), 1971 CanLII 481 (ON SC), 24 D.L.R. (3d) 13 (Ont. H.C.), aff'd (1972), 1972 CanLII 1184 (ON CA), 30 D.L.R. (3d) 24 (Ont. C.A.)
Statutes and Regulations Cited
Act respecting the Caisse de dépôt et placement du Québec, R.S.Q. 1977, c. C‑2, s. 4.
Canada Business Corporations Act, S.C. 1974‑75‑76, c. 33 [am. 1978‑79, c. 9], ss. 121 to 125.
Interpretation Act, R.S.C. 1970, c. I‑23, s. 16.
Authors Cited
Hogg, Peter W. Liability of the Crown in Australia, New Zealand and the United Kingdom. Australia: Law Book Co., 1971.
McNairn, Colin H. H. Governmental and Intergovernmental Immunity in Australia and Canada. Toronto: University of Toronto Press, 1977.
APPEAL from a judgment of the Quebec Court of Appeal, 1985 CanLII 3185 (QC CA), [1985] C.A. 164, 22 D.L.R. (4th) 336, 29 B.L.R. 259, setting aside a judgment of the Superior Court, J.E. 82‑992. Appeal dismissed.
Gérald Tremblay, Q.C., and Martin Boodman, for the appellant.
Gaspard Côté, Q.C., and Claude Joyal, for the respondent.
René Morin and Denis Lemieux, for the intervener the Attorney General of Quebec.
D. W. Kinloch, for the intervener the Attorney General for Alberta.
The judgment of the Court was delivered by
- La Forest J.‑‑The sole issue in this appeal is whether the Caisse de dépôt et placement du Québec, as an agent of the Crown in right of the Province of Quebec, may invoke Crown immunity as provided in s. 16 of the Interpretation Act, R.S.C. 1970, c. I‑23, and put itself outside the purview of the provisions of the Canada Business Corporations Act, S.C. 1974‑75‑76, c. 33, as amended, relating to the rights and obligations of shareholders, and in particular of ss. 121 to 125 of that Act, the insider trading provisions.
Facts
Facts
The appellant is a corporation created by An Act respecting the Caisse de dépôt et placement du Québec, R.S.Q. 1977, c. C‑2. Section 4 of that Act provides in part:
The Fund [the Caisse] shall be an agent of the Crown in right of Québec.
The moveable and immoveable property belonging to the Fund shall be the property of the Crown in right of Québec.
The Caisse de dépôt et placement du Québec was created for the purpose of managing and investing funds received by the government under various statutory programs such as the Quebec Pension Plan. It accordingly handles very substantial sums of public money.
At the time the present motion was brought, the Caisse and the Société générale de financement du Québec jointly owned or controlled 44.3 per cent of the outstanding shares of Domtar Inc. The Caisse itself owned or controlled over 22.7 per cent of the issued common shares of Domtar, a publicly traded company governed by and continued under the Canada Business Corporations Act.
Subsections 122(2) and (4) of the Canada Business Corporations Act provide:
- ...
(2) A person who becomes an insider shall, within ten days after the end of the month in which he becomes an insider, send to the Director an insider report in the prescribed form.
(4) An insider whose interest in securities of a distributing corporation changes from that shown or required to be shown in the last insider report sent or required to be sent by him shall, within ten days after the end of the month in which such change takes place, send to the Director an insider report in the prescribed form.
It is common ground that the Caisse by virtue of its ownership of more than 10 per cent of the shares of Domtar became an insider of that corporation for the purposes of ss. 121 and 122 of the Canada Business Corporations Act. Nevertheless, the Caisse refused to submit to the Director an insider report in the prescribed form. The Caisse contends that by virtue of Crown immunity as provided in s. 16 of the Interpretation Act it is exempt from the application of subss. 122(2) and (4) of the Canada Business Corporations Act. Section 16 of the Interpretation Act reads as follows:
No enactment is binding on Her Majesty or affects Her Majesty or Her Majesty's rights or prerogatives in any manner, except only as therein mentioned or referred to.
In response to the refusal by the Caisse to file the insider report, the respondent Director filed a motion for declaratory judgment declaring that the appellant is bound by the provisions of the Canada Business Corporations Act relating to the rights and obligations of shareholders and that the appellant is required to produce the insider report according to the terms of the Canada Business Corporations Act.
The Courts Below
The Courts Below
Hannan J. in the Superior Court, J.E. 82‑992, held that this Court's decision in Her Majesty in right of the Province of Alberta v. Canadian Transport Commission, 1977 CanLII 150 (SCC), [1978] 1 S.C.R. 61 (the P.W.A. case), governed the case. He determined that a Provincial Crown agent such as the Caisse was not bound by a federal statute absent "mention of or reference to the . . . Crown in the . . . Act, and in the absence of any ground to conclude that the provisions in question of the [Canada Business Corporations Act] extend to the Crown and its . . . agent by necessary implication." Hannan J. found no such necessary implication. He distinguished this Court's decision in The Queen v. Murray, 1967 CanLII 49 (SCC), [1967] S.C.R. 262, by noting that Martland J. in that case had stated that the provincial legislation in issue there did not seek to "bind" the Crown. The Canada Business Corporations Act, in the view of Hannan J., is binding legislation, and s. 16 of the Interpretation Act thus applied to render subss. 122(2) and (4) of the Act inapplicable to the Caisse.
The Court of Appeal of Quebec allowed the appeal from the judgment of Hannan J.: 1985 CanLII 3185 (QC CA), [1985] C.A. 164. It was common ground before the Court of Appeal and this Court that s. 16 of the Interpretation Act applies to the Crown in right of a province and to an agent of the Crown, and further that the Canada Business Corporations Act does not "mention or refer" to the Crown in the sense required by s. 16.
There exist, however, several exceptions to Crown immunity under s. 16. Tyndale J.A., after considering in detail four possible exceptions to Crown immunity, held that the rule that the Crown may not accept the benefit of the law without also incurring its burdens applied in this case. He said (at p. 173):
. . . I find that in a case where the Crown relies on the law, whether common or statutory, for a right which it asserts, it takes that law as it finds it, with not only the rights but also the limitations and obligations for which it provides.
When the caisse became a shareholder in Domtar as an investment in order to obtain such rights and advantages as security, income, capital gain and liquidity, it could only do so by taking advantage of the provisions of the Act; it is therefore bound by all the provisions of the Act; it cannot pick and choose between those which please it and those which do not.
Tyndale J.A. distinguished the P.W.A. case, on the ground that the benefit/burden exception was not in issue in that case. There were two majority opinions supporting the judgment in the P.W.A. case. That given by Laskin C.J. concluded that the court below had incorrectly decided that the Crown was bound by necessary implication. That of Martland J. focussed on the construction of a particular term in the regulations in question.
Monet J.A. and L'Heureux‑Dubé J.A. (as she then was), in separate reasons, concurred with Tyndale J.A. The Court of Appeal thus allowed the appeal and issued a declaration in the following terms:
[TRANSLATION] declares that as the respondent caisse de dépôt et placement du québec has become a shareholder, whether as the true owner or as exercising control of over ten per cent (10%) of the ordinary shares of Domtar Inc., it is bound by the provisions of the said Act on the obligations and duties of the company shareholders to which that Act applies;
declares that the respondent is required to submit an "insider" report to the applicant in the form prescribed by the said Act and the Regulations;
declares that the applicant has the right, in his capacity as Director, to require that the respondent comply with the provisions of the Act and the Regulations and furnish it the "insider" report in the prescribed form.
Analysis
Analysis
I am in agreement with Tyndale J.A. that the benefit/burden exception to Crown immunity exists and that it applies in this case to render the insider reporting provisions of the Canada Business Corporations Act applicable to the Caisse.
There can be no disputing the existence of the benefit/burden exception (sometimes referred to as the "waiver" exception) to Crown immunity. It is of ancient vintage; see Crooke's Case (1691), 1 Show. K.B. 208, at pp. 210‑11, 89 E.R. 540, at p. 542, where it is said:
If they have any right, the King can only have it by this Act of Parliament, and then they must have it as this Act of Parliament gives it.
The exception has been applied by this Court as recently as The Queen v. Board of Transport Commissioners, 1967 CanLII 93 (SCC), [1968] S.C.R. 118, and The Queen v. Murray, supra; see also Toronto Transportation Commission v. The King, 1949 CanLII 35 (SCC), [1949] S.C.R. 510.
In Murray, the Crown brought an action against the employer of the driver of a private vehicle, seeking damages for the loss of services of a member of the armed forces who was injured in an accident. The driver was found to be negligent to the extent of 75 per cent of the damage, and the respondent Murray for 25 per cent. The issue in the case was whether s. 5 of The Tortfeasors and Contributory Negligence Act could bind the Crown. Application of the section would have limited the Crown's claim to 25 per cent of the damages. Martland J. for the Court held that the claim in negligence "could arise only because of the master and servant relationship deemed to exist between the Crown and members of the armed services by virtue of s. 50 of the Exchequer Court Act" (p. 269). That being the case, Martland J. continued, the Crown was seeking the benefit of the law, and was consequently subject to its restrictions, i.e., s. 5 of The Tortfeasors and Contributory Negligence Act which would limit the Crown's recovery to 25 per cent. It made no difference that the benefit and the restriction arose under different statutes.
The view that the Crown may be bound by the limitations of a law when it invokes its benefits was approved in the following obiter dictum of Laskin C.J. in the P.W.A. case at p. 72:
This does not mean that the federal Crown may not find itself subject to provincial legislation where it seeks to take the benefit thereof . . . .
Laskin C.J. cited both Toronto Transportation Commission, supra, and Murray, supra, in support of this proposition.
The only question to be decided here, then, is whether the exception extends to this case. I need not, therefore, examine the other exceptions to Crown immunity discussed in the courts below except to say, because of the manner in which the issue was there dealt with, that the benefit/burden exception is quite distinct from any avoidance of Crown immunity arising by "necessary implication" from the terms of a statute. Dickson J. (as he then was) in R. v. Eldorado Nuclear Ltd., 1983 CanLII 34 (SCC), [1983] 2 S.C.R. 551, at p. 558, obiter, doubted whether the necessary implication exception survived the revision of s. 16 of the Interpretation Act effected by S.C. 1967‑68, c. 7 (now R.S.C. 1970, c. I‑23, s. 16); see also the P.W.A. case at p. 75; but see R. v. Ouellette, 1980 CanLII 9 (SCC), [1980] 1 S.C.R. 568, which, it was argued, may be interpreted as an application of the necessary implication doctrine. Hannan J. apparently felt that the benefit/burden exception was subsumed under the necessary implication exception, and held that in the absence of any express words or implication to be found in the Canada Business Corporations Act, Crown immunity is not affected by the Act.
There is no need to consider the necessary implication exception, because the two exceptions are quite distinct. The necessary implication exception has been interpreted in various ways over the years, but it essentially arises as an adjunct to the necessity for express words binding the Crown; the Crown may be bound in the absence of express words where some absurdity would result if the Crown were held to be immune. This has sometimes been narrowed to a requirement that the "beneficent purpose [of the statute] . . . be wholly frustrated unless the Crown were bound" (see Province of Bombay v. Municipal Corporation of Bombay, [1947] A.C. 58 (P.C.), at p. 63).
The benefit/burden exception is quite different. Professor Hogg in his book, Liability of the Crown in Australia, New Zealand and the United Kingdom (1971), summarizes the doctrine as follows (at p. 183):
The restrictions [on a statutory right] are regarded as restrictions on the right itself, and if the Crown could disregard them it would receive a larger right than the statute actually conferred. In other words all of the statutory provisions affecting a right to which the Crown claims title are interpreted as if they were advantageous to the Crown . . . [T]here is no room for the rule requiring express words or necessary implication.
C. H. H. McNairn in Governmental and Intergovernmental Immunity in Australia and Canada (1977), at p. 10 states:
By taking advantage of legislation the crown will be treated as having assumed the attendant burdens, though the legislation has not been made to bind the crown expressly or by necessary implication. The force of the rule of immunity is avoided by the particular conduct of the crown and the integrity of the relevant statutory provisions, beneficial and prejudicial.
Counsel for the appellant appears to admit the existence of the benefit/burden exception, but argues that by purchasing shares in Domtar, the Caisse did not invoke a benefit provided by the statute, but rather did nothing more than exercise a right conferred upon it by its charter. The Caisse, it is contended, could have purchased the shares in the absence of the Canada Business Corporations Act. As a consequence, no statutory benefit was acquired to which the burdens imposed by the Canada Business Corporations Act correspond. Only by taking particular advantage of a specific provision of the Act could the Crown subject itself to burdens attendant upon that provision. Counsel did not further elaborate on this claim.
A question which immediately comes to mind is whether by taking advantage of one right conferred by the Act (e.g., voting the shares) the Crown would subject itself to all or only some of the other provisions of the Act. If only some, it is difficult to conceive how it could be determined which provisions would apply ‑‑ indeed it is hard to see how most provisions, including those relating to insider reports, would ever apply to the Crown. If, on the other hand, all of the Act would apply upon the Crown taking affirmative advantage of one provision, then it is difficult to see why this result should not follow from the purchase of the shares alone. Upon purchasing the shares certain rights, e.g., the right to vote the shares and the right to receive dividends, accrue immediately to the purchaser. As will be discussed, the aggregate of these rights and their attendant obligations are indeed definitive of the notion of a share. With respect, I cannot see why some affirmative act with regard to one right acquired by the purchaser of a share changes the situation in any relevant way.
Counsel for the Attorney General of Alberta put the same point somewhat differently, contending that there is not a sufficient "nexus" between the right claimed and the burden assumed. It is quite correct to conclude that whenever the question of the application of the benefit/burden exception arises, the issue is not whether the benefit and burden arise under the same statute, but whether there exists a sufficient nexus between the benefit and burden. As McNairn, op. cit., at p. 11, puts it:
It is not essential . . . that the benefit and the restriction upon it occur in one and the same statute for the notion of crown submission to operate. Rather, the crucial question is whether the two elements are sufficiently related so that the benefit must have been intended to be conditional upon compliance with the restriction.
It is also true that the Caisse, as agent for the Crown in right of the Province, is not seeking affirmatively to take advantage of a provision of a statute or of the common law. It simply purchased shares in a corporation which happened to be governed by a statute, the Canada Business Corporations Act. It brought no action at law and sought no other advantage.
To conclude from this, however, that the Crown is not bound by the obligations attendant upon the rights conferred by the statute requires that one presuppose a rather simplistic view of the nature of a share and its purchase. A share is not an isolated piece of property. It is rather, in the well‑known phrase, a "bundle" of interrelated rights and liabilities. A share is not an entity independent of the statutory provisions that govern its possession and exchange. Those provisions make up its constituent elements. They define the very rights and liabilities that constitute the share's existence. The Canada Business Corporations Act defines and governs the rights to vote at shareholders' meetings, to receive dividends, to inspect the books and records of the company, and to receive a portion of the corporation's capital upon a winding up of the company, among many others. A "share" and thus a "shareholder" are concepts inseparable from the comprehensive bundle of rights and liabilities created by the Act. Nothing in the statute, common sense or the common law indicates that this bundle can be parcelled out piecemeal at the whim of the Crown. It cannot pick and choose between the provisions it likes and those it does not. To do so would be to permit it to define an entity which is the creature of federal legislation. What the Caisse obtained was an integral whole.
The very act of purchasing a share, then, is an implicit acceptance of the benefits of this statutory regime. These benefits are indissolubly intertwined with the restrictions attendant upon them.
Absent the statutory regime, the idea of a share as an object of commerce is meaningless. The relationship between benefit and restriction is sufficiently close that the Crown must be determined to have taken the law as it found it. The relationship between the benefits of share ownership and the obligations of insiders is particularly close. As Dickson J. (as he then was) stated in another context in Multiple Access Ltd. v. McCutcheon, 1982 CanLII 55 (SCC), [1982] 2 S.C.R. 161, at p. 179:
The proper relationship between a company and its insiders is central to the law of companies and, from the inception of companies, that relationship has been regulated by the legislation sanctioning the company's incorporation.
- Hannan J. in the court of first instance distinguished this Court's decision in Murray, supra, on the ground that the Court there held, at p. 268, that ". . . this is not a case in which a provincial legislature has sought to "bind" the federal Crown, in the sense of imposing a liability upon it or of derogating from existing Crown prerogatives, privileges or rights." Hannan J. concluded that this quotation
. . . clearly implies that had the provincial legislation been intended to "bind" the Crown, it might well have been inapplicable. In the present case, the application by analogy of the words of Martland J., would dictate that, as the [Canada Business Corporations Act] seeks to bind the agent of the Crown in right of Quebec, it is inapplicable to such agent.
With respect, in my view the analogy between Murray and this case works to the benefit of the respondent. The Canada Business Corporations Act, like the Exchequer Court Act which was the subject of Murray, merely "established a relationship from which certain results might flow", to use the words of Martland J. in Murray. Just as in Murray the Crown was not bound by the prejudicial provisions of the law until it chose to take advantage of its beneficial aspects, here no right or prerogative of the Crown is affected by the Canada Business Corporations Act standing alone. It was only by seeking the benefits of the statute by purchasing shares that the Caisse chose to bring itself within the purview of the law relating to shareholders. In the words of Professor Hogg, op. cit., at p. 183, "when the Crown claims a statutory right the Crown must take it as the statute gives it, that is, subject to any restrictions upon it." Otherwise, the Crown would receive a "larger right than the statute actually conferred" (p. 183).
Application of the benefit/burden exception does not result in subsuming the Crown under any and every regulatory scheme that happens to govern a particular state of affairs. Although some earlier authorities (see, e.g., Bank of Montreal v. Bay Bus Terminal (North Bay), Ltd. (1971), 1971 CanLII 481 (ON SC), 24 D.L.R. (3d) 13 (Ont. H.C.), at p. 20, aff'd (1972), 1972 CanLII 1184 (ON CA), 30 D.L.R. (3d) 24 (Ont. C.A.)) had been thought by some to support the view that the Crown was bound by any regulatory scheme of sufficient scope, this approach was rejected by Laskin C.J. in the P.W.A. case (p. 69). The exception is not of such broad reach. Its application depends not upon the existence or breadth of a statutory scheme regulating an area of commerce or other activity, but, as noted earlier, upon the relationship or nexus between the benefit sought to be taken from a statutory or regulatory provision and the burdens attendant upon that benefit. The focus is not on the source of the rights and obligations but on their content, their interrelationship. As McNairn, op. cit., puts it at pp. 11‑12:
Reliance upon a statute may . . . be for such a limited purpose that the crown ought not, as a result, to be taken to have assumed the attendant burdens. Such is the case when a statute is resorted to for a purely defensive reason, for example to give notice under a registration scheme of the existence of a crown claim. The use of a statute in this way may be distinguished from active reliance to secure positive rights, the assumption of the burdens of a statute being a possible consequence only of the latter circumstance.
- Here, the interrelationship between the rights and obligations acquired by the purchaser of a share is so close both conceptually and historically that there can be no question of the application of the benefit/burden exception. Indeed, as earlier mentioned, a share is an integral whole. Thus, the Crown, when it purchases a share of a company to which the Act applies, is bound by the entirety of the Canada Business Corporations Act in so far as it defines and regulates the rights and obligations of shareholders.
Disposition
Disposition
- I would accordingly dismiss the appeal.
Appeal dismissed.
Solicitors for the appellant: Clarkson, Tétrault, Montréal.
Solicitor for the respondent: Gaspard Côté, Montréal.
Solicitors for the intervener the Attorney General of Quebec: René Morin and Denis Lemieux, Ste‑Foy.
Solicitor for the intervener the Attorney General for Alberta: The Department of the Attorney General, Edmonton.
* Estey and Le Dain JJ. took no part in the judgment.
