VANCOUVER – The ongoing Rogers family battle made its way into a Vancouver courtroom of the British Columbia Supreme Court Monday when lawyers for Edward Rogers, chair of the Rogers Control Trust, and Rogers Communications Inc. (RCI) laid out their arguments before Justice Shelley Fitzpatrick.
At issue before the court is whether Mr. Rogers, the petitioner in this case, has the power as chair of the Rogers Control Trust to make changes to RCI’s board of directors by consent resolution rather than at a shareholder meeting.
Mr. Rogers’s lawyer Kenneth McEwan told the court the matter at hand is “a simple and narrow question of interpretation.”
The question, according to McEwan, is “can the petitioner who is empowered to vote 97.5 per cent of the class A voting shares of Rogers Communications use the consent resolution powers of the British Columbia Corporation Act to replace certain directors of Rogers Communications.”
RCI, while headquartered in Toronto, is incorporated in British Columbia. As such, it follows B.C.’s Business Corporations Act as well as the articles of RCI as required by the Act.
The key article discussed in court is article 3.4, which has to do with the removal of directors. The article states: “Subject to the provisions of the Act, the shareholders may by ordinary resolution remove any Director from office and the vacancy created by such removal may be filled at the same meeting failing which it may be filled by the Directors.”
As per the B.C. Business Corporations Act, an ordinary resolution is one that is either “(a) passed at a general meeting by a simple majority of the votes cast by shareholders voting shares that carry the right to vote at a general meeting” or can be “(b) passed, after being submitted to all of the shareholders holding shares that carry the right to vote at general meetings, by being consented to in writing by shareholders holding shares that carry the right to vote at general meetings who, in the aggregate, hold shares carrying at least a special majority of the votes entitled to be cast on the resolution.”
In the case of RCI, a special majority is 66.7% of the votes cast, according to the company’s articles.
A consent resolution can mean “in the case of a resolution of shareholders that may be passed as an ordinary resolution, a resolution referred to in paragraph (b) of the definition of “ordinary resolution”,” says the Act.
RCI’s articles provide for board directors to be removed by an ordinary resolution of the voting shareholders, and as such, McEwan argued, by consent resolution.
“There’s no power in the Act for exclusion of that shareholder right, to act by consent resolutions where thresholds are met, there’s only a power in the company to alter the threshold,” McEwan argued.
RCI, however, argued that when all components of article 3.4 are taken into consideration, as well as articles 3.3 and 3.5 which discuss the election of directors and vacation of office respectively, it becomes apparent the removal of directors needs to be done at a meeting.
“What Mr. McEwan has said is let’s just look at the removal, it can be done by way of an ordinary resolution,” said RCI lawyer Stephen Schachter. He argued McEwan does not address the part of article 3.4 that says “may be filled at the same meeting” in his argument. Schachter argued this part of article 3.4 applies to the entirety of the article, meaning a meeting is required for the removal of directors.
David Conklin, another lawyer for RCI told the court the words used in the articles have meaning “and that in the context that meaning can only, when looking at 3.4, lead to the conclusion there must be a meeting to replace and remove directors.”
“The interpretation we offered is a holistic interpretation of the articles. It serves the purpose of protecting shareholder interests and stakeholder interests. It protects the best interests of Rogers,” Conklin said.
While the discussion around article 3.4 was central to the hearing, both sides made other arguments as well.
RCI’s lawyers argued the company’s B class shareholders have a right to be included in meetings.
“The right to participate in shareholders meetings, particularly in relation to the election of directors, is so fundamental that removing their right to do so, including through written resolution in lieu of a meeting must be stated explicitly and clearly,” said Schachter.
McEwan agued RCI is trying to distract from the simplicity of the issue at hand. “The respondent otherwise seeks by various means to misdirect from the fact that this matter simply includes an exercise in shareholder rights,” McEwan said.
He listed several ways RCI attempts to distract from the issue’s simplicity. This includes that RCI says minority shareholder rights are being infringed upon.
In a written submission to the court, Mr. Rogers’s lawyers further argued “RCI’s affidavits create a controversy that does not have to be resolved and has no bearing on the issue before the Court.”
The submission goes on to state: “Reduced to their essence, the affidavits all repeat the same complaint: Mr. Rogers and the Advisory Committee of the Control Trust have not adhered to the affiants’ vision of “good governance”. As a result, the Court should (on a jurisdictional basis that is not specified and does not exist) override the Act, the Articles and the Control Trust Will.”
The written submission also makes the case that anything included in the affidavits regarding RCI CEO Joe Natale’s performance is not relevant as the RCI board “will determine his tenure.” It takes issue with John MacDonald and Loretta Rogers’s affidavits as well, arguing they too contain irrelevant information.
“The only issue before this Court is the Director Group’s own tenure as Board members and the authority of the controlling shareholder to determine it. Until RCI’s dual class share structure is changed, the controlling shareholder determines the composition of the board,” the submission reads.
The judge is expected to make a decision by Friday.
