Posted by Seva on July 10, 2008
In an action involving foreign corporations or corporate-like trusts, how should the question of plaintiff shareholders’ standing to make a claim be decided? This issue was addressed by Madam Justice Newbury confirmed in Everest Canadian Properties Ltd. v. Mallmann, 2008 BCCA 276. Considering the classic rule from Foss v. Harbottle, which dictates that a shareholder cannot sue for injury to the corporation, she confirmed that this is a procedural rule. Thus, a shareholder’s standing is to be determined in accordance with lex fori even if the corporation involved is foreign. I think that it may useful to reproduce the two key paragraphs from the judgment where Newbury J.A. pays heed not only to precedents, but to academic literature on this subject as well:
12 Although the characterization of the rule in Foss v. Harbottle for conflicts of law purposes was not discussed by the court below, it is implicit in Ross J.’s reasons and in counsel’s arguments that the rule is a procedural one and that therefore the lex fori applies to determine a shareholder’s standing to sue. This was the view taken in Heyting v. DuPont,  2 All E.R. 273, 1 W.L.R. 843 (C.A.), where a shareholder of a Jersey company sought to sue, in England, a corporate director for misfeasance. At the outset of his reasons, Russell L.J. said this:
This appeal is from a decision of Plowman J. that a claim, asserting liability of a director of a Jersey incorporated limited liability company, to the company for damages for misfeasance, could not be put forward by a shareholder suing on behalf of himself and shareholders other than the allegedly liable director, who held the majority of shares and could therefore control a vote on whether the company should be a plaintiff in such a claim. It thus appears that the question is whether this is a case in which a departure from the rule in Foss v. Harbottle is required. I dare say that the rule in Foss v. Harbottle is a conception as unfamiliar in the Channel Islands as is the Clameur de Haro in the jurisdiction of England and Wales. But clearly this is a matter of procedure to be decided according to the law of this forum. [At 848; emphasis added.]
13 Although this reasoning was questioned by one writer (see Anthony Boyle, “A Liberal Approach to Foss v. Harbottle” (1964) 27 Mod. L. Rev. 603), the same author in a later article (“The Shareholders’ Derivative Action in the English Conflict of Laws” (2000) Eur. Bus. L. Rev. 130) retreated from his previous position and agreed that “… the principle of the company as the proper plaintiff (even if it rests upon the concept of corporate personality) should probably be regarded as procedural. Certainly the conditions that govern the use of the derivative actions are essentially procedural.” (At 131.) In Canada, although the matter is not free from doubt, the better view would appear to accord with Heyting v. DuPont. (See, e.g., Baniuk v. Carpenter (No. 2) (1987) 85 N.B.R. (2d) 385, at 393-4, 217 A.P.R. 385 (C.A.) and Teck Corp. v. Millar,  2 W.W.R. 385 at 388-9, 33 D.L.R. (3d) 288 (B.C.S.C.), at para. 13; cf. King v. On-Stream Natural Gas Management Inc.,  B.C.J. No. 1302 (S.C.) (QL) at para. 67.)
While the conclusion reached does not appear to be particularly controversial, it is always useful to have recent and persuasive authorities restating an old rule.
Posted in choice of law, civil procedure, General | Tagged: choice of law, civil procedure, corporate law, lex fori, procedural | Leave a Comment »
Posted by Seva on March 12, 2008
This morning, I woke up to a very interesting comment left by professor John Swan, counsel with the Toronto firm of Aird & Berlis LLP and an adjunct professor at Osgoode Hall Law School.
Since the existence of the doctrine of renvoi is (i) necessarily entailed by the struc-ture of conflicts analysis and (ii) logically insoluble, one has to consider the pos-sibility that the entire structure of conflicts is founded on a fundamental misap-prehension of what is required to deal with cases of geographically complex facts, i.e., all cases that would be regarded as coming within the rubric of “Conflicts”.
After teaching the subject for over 25 years, I have come firmly to the conclusion that it simply should not exist but should instead disappear (i) with respect to issues of jurisdiction and the recognition and enforcement of foreign judgments into questions of constitutional law within Canada and international law outside it, and (ii) with respect to all issues of contracts, torts, etc., into simple issues of those areas. See Swan, “The Canadian Constitution, Federalism and the Conflict of Laws” (1985), 63 Canadian Bar Review 272, “Choice of Law in Contracts” (1991), 19 Canadian Business Law Journal 213, and “Federalism and the Conflict of Laws: The Curious Position of the Supreme Court of Canada” (1995), 46 University of South Carolina Law Review 923.
I admit that this is a perspective that I have not been exposed to before, not in the curriculum of the conflict of laws course that I took or my conversations with professors or practitioners. However, the idea is intriguing to me. Is the whole area of conflict of laws merely a byproduct of some overzelous lawyers or judges who had to create a whole new area of law instead of realizing that the questions they faced could be resolved within the existing frameworks, or is it that the discrete nature of this area of law has outlived its usefulness? In other words, in the days of pragmatic and functional approach to law, rather than the strict formal approached espoused in the 19th century, is our current legal system sufficiently flexible to absorb conflicts into existing legal dogmas?
Even more importantly (in my mind), I have the following two questions about Prof. Swan’s conclusions:
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Posted in choice of law, foreign judgments, General, jurisdiction simpliciter | Tagged: choice of law, conflict of laws, foreign judgments, Jurisdiction | 1 Comment »
Posted by Seva on March 10, 2008
Welcome to Renvoi, a legal blog (blawg) on the subject of conflict of laws in Canadian law. This is my first attempt at a blawg, so I think I must start by asking everyone to bear with me for a little while until I get ramped up.
As I mention in the “about” page, I am not an expert in this field. Rather, I am an amateur who is very interested in this area of law. Thus, this blawg is not intended to provide any advice, but rather express my $0.02 on new developments in this field.
I guess the first question I should address is what is “renvoi”? To make a long story short, it is a troublesome conflict of laws principle under which a local court decides to apply foreign law to a dispute, only to discover that under this foreign law the dispute must in fact be governed by local law (lex fori) or yet other foreign law. There are generally two types of renvoi:
Partial Renvoi: local court of country X applies its private law and choice of law rules and decides that the entire law of country Y applies to the dispute, both its private law and choice of law rules. Under the choice of law rules of country Y, the dispute is actually governed by the private law of country Z, which can actually be the same as X. In this case, the court ultimately applies private law of Z to the dispute.
Full Renvoi: the same example applies, but this time the conflict of law rules of Y dictate that the entire law of Z applies, rather than just its private law as in the previous example. Now, if Z is the same country as X, then we have a hot potato problem or an endless loop, with the law of X bouncing the dispute to the entire law of Y, which bounces it back to the entire law of X, and so on.
Full renoi doesn’t happen in common law because choice of law principles used in various common law jurisdictions are fairly universal and generally point to a single appropriate body of law. But, at least theoretically, this may happen between common law and civil law jurisdictions, where choice of law principles may be quite different. I don’t know of any case where this has actually happened, however, I would guess that if this happened in Canada, the local court would accept the remission based on the choice of law principles from the law of Y and apply lex fori to the dispute.
Posted in choice of law, General | Tagged: Applicable Law, choice of law, renvoi | 3 Comments »