The Ontario Superior Court of Justice (Commercial List) recently confirmed that “demonstrated impropriety” is required to warrant court intervention in the appointment of an independent chair of a shareholders’ meeting in a proxy contest. In Meson Capital Partners, LLC v Aberdeen International Inc. (Aberdeen),[1] Norton Rose Fulbright Canada’s Special Situations Team successfully represented the Special Committee of Aberdeen International Inc. (the Company) on an Application brought by Meson Capital Partners, LLC and Nightscape Capital (UK) LLP (together the Dissidents) for relief in respect of a special meeting of the shareholders of Aberdeen (the Meeting).
Following the Dissidents’ requisitioning of the Meeting, Aberdeen’s board of directors established a special committee composed of three independent directors to direct all matters pertaining to the dissident shareholders’ proxy campaign (the Special Committee). The Special Committee proposed that one of its members, Bernard Wilson, chair the Meeting. The Dissidents brought an Application seeking, inter alia, the appointment of an independent chair of the Meeting. The Dissidents argued that Mr. Wilson suffered from a conflict of interest that brought his ability to conduct the Meeting fairly into question. In part, the Dissidents took issue with Mr. Wilson’s relationship with insiders of Aberdeen. The Dissidents also challenged public statements that Mr. Wilson made in the context of the proxy contest.
The Court dismissed the Dissidents’ request for the appointment of an independent chair of the Meeting, citing its earlier decision in Maudore Minerals Ltd v Harbour Foundation[2] (Maudore), where Norton Rose Fulbright Canada’s Special Situations Team also successfully represented the interests of a special committee. Relying on Maudore, the Court in Aberdeen described the current state of the law as generally requiring evidence of a proposed chair’s “demonstrated impropriety” to warrant court intervention. Finding that there was no concrete evidence of impropriety in the case before it, the Court in Aberdeen held that the Dissidents’ “speculation and expressions of concern” were not sufficient to warrant its exercise of discretion to intervene. The Court noted that if the test could be expressed as the demonstration of a likelihood that the proposed chair will not act fairly and reasonably as a result of his or her previous actions or other circumstances, there was similarly an absence of evidence to this effect in respect of Mr. Wilson.
Importantly, the Court confirmed its holding in Maudore that the appropriate course of action for dissidents seeking relief in a proxy contest is to “await the results of the Meeting, including any material determinations of the chair, and to apply to [a court] for relief under [applicable business corporations legislation] at that stage if they feel there has been some error or impropriety in the conduct of the Meeting.” Aberdeen serves as a reminder to dissidents seeking pre-meeting relief that mere speculation as to a proposed chair’s conduct at the meeting will not meet the threshold for court intervention – the appropriate course of action is to let the meeting take place first, and litigate after if necessary.
[1] 2015 ONSC 532.
[2] 2012 ONSC 4255.
