Manitoba Securities Commission v. Crocus Investment Fund et al., (2007) 214 Man.R.(2d) 44 (CA)

• Judge: Monnin, Hamilton and Freedman, JJ.A.
• Court: Court of Appeal (Manitoba)
• Case Date: November 30, 2006
• Jurisdiction: Manitoba
• Citations: (2007), 214 Man.R.(2d) 44 (CA);2007 MBCA 36

Securities Comm. v. Crocus Inv. (2007), 214 Man.R.(2d) 44 (CA);

      395 W.A.C. 44

MLB headnote and full text

Temp. Cite: [2007] Man.R.(2d) TBEd. AP.001

The Manitoba Securities Commission (applicant/respondent) v. Crocus Investment Fund (respondent/respondent) and Bernard Bellan (intervener/appellant) and Charles Curtis, Peter Olfert, Waldron (Wally) Fox-Decent, Lea Baturin, Albert Beal, Ron Waugh, Diane Beresford, Sylvia Farley, Robert Hilliard, Robert Ziegler, David G. Friesen, Sherman Kreiner, Jane Hawkins, James Umlah, John Clarkson and Hugh Eliasson (interveners/respondents)

(AI 06-30-06444; 2007 MBCA 36)

Indexed As: Manitoba Securities Commission v. Crocus Investment Fund et al.

Manitoba Court of Appeal

Monnin, Hamilton and Freedman, JJ.A.

March 30, 2007.

Summary:

Former directors and officers of Crocus Investment Fund (Crocus) were involved in certain legal matters, which included an investigation by the Office of the Auditor General, an investigation by the Manitoba Securities Commission and a proposed class action. The court appointed receiver of Crocus sought an order authorizing it to pay legal fees of the former directors and officers to the date of its appointment, subject to certain rights of reimbursement. It also sought an order authorizing it to refrain from paying ongoing legal expenses of those persons until the completion of the proceedings.

The Manitoba Court of Queen's Bench, in a decision reported at 200 Man.R.(2d) 89, authorized and directed the receiver to pay all reasonably incurred ongoing legal expenses of the former directors and officers, as well as the amounts of any related unfavourable judgments, subject to certain rights of reimbursement. A shareholder of Crocus appealed.

The Manitoba Court of Appeal dismissed the appeal.

Company Law - Topic 4193

Directors - Liability of directors - Indemnity clauses - General - [See first Company Law - Topic 4482 ].

Company Law - Topic 4482

Officers and agents - Compensation - Indemnity for legal fees or judgments against - Former directors and officers of Crocus Investment Fund (Crocus) were involved in certain legal matters, which included investigations by the Office of the Auditor General and the Manitoba Securities Commission and a proposed class action - The court appointed receiver of Crocus sought an order authorizing it to refrain from paying ongoing legal expenses of the former officers and directors until the completion of those proceedings - The receiver argued that the right of indemnity contained in s. 119 of the Corporations Act, Crocus bylaw 1.7 and the severance agreements of some of the former officers, did not entitle the former officers and directors to immediate funding of their defences and that they had to first meet the criteria that they acted honestly and in good faith with a view to the best interests of the corporation and that they had reasonable grounds for believing that their conduct was lawful - The motion judge held that those who were entitled to potential indemnification should be presumed to have acted in good faith in the absence of evidence to the contrary and should receive payment on an ongoing basis of all reasonable defence costs incurred - The Manitoba Court of Appeal dismissed an appeal - See paragraphs 31 to 56.

Company Law - Topic 4482

Officers and agents - Compensation - Indemnity for legal fees or judgments against - Former directors and officers of Crocus Investment Fund (Crocus) were involved in certain legal matters, which included investigations by the Office of the Auditor General and the Manitoba Securities Commission and a proposed class action - The court appointed receiver of Crocus sought an order authorizing it to refrain from paying ongoing legal expenses of the former officers and directors until the completion of those proceedings - The motion judge ordered that the receiver was authorized to pay the legal expenses of former officers and directors on an ongoing basis, as well as the amounts of any unfavourable judgments, subject to certain rights of reimbursement - The Manitoba Court of Appeal dismissed an appeal - See paragraphs 31 to 56.

Company Law - Topic 4482

Officers and agents - Compensation - Indemnity for legal fees or judgments against - Former directors and officers of Crocus Investment Fund (Crocus) were involved in certain legal matters, which included investigations by the Office of the Auditor General and the Manitoba Securities Commission and a proposed class action - The court appointed receiver of Crocus moved for an order authorizing it to refrain from paying ongoing legal expenses of the former officers and directors until the completion of those proceedings - The motion judge ordered that the receiver was authorized to pay the legal expenses of former officers and directors on an ongoing basis, as well as the amounts of any unfavourable judgments, subject to certain rights of reimbursement - A shareholder of Crocus appealed - He argued that the motion by the receiver, being an interim or interlocutory motion, should have been decided in accordance with the three-part test set out in Metropolitan Stores (MTS) Ltd. (S.C.C.), and affirmed in RJR-MacDonald Inc. (S.C.C.) - The Manitoba Court of Appeal rejected the argument - The three-part test applied in cases of interlocutory injunctions and stays of proceedings - This case involved a motion about the funding of legal expenses which had none of the extraordinary features of a stay or an injunction - See paragraphs 23 to 30.

Injunctions - Topic 1600

Interlocutory or interim injunctions - General principles - General principles respecting grant of interlocutory or interim injunction - [See third Company Law - Topic 4482 ].

Practice - Topic 5275

Trials - General - Stay of proceedings - General - [See third Company Law - Topic 4482 ].

Cases Noticed:

Blair v. Consolidated Enfield Corp., [1995] 4 S.C.R. 5; 187 N.R. 241; 86 O.A.C. 245, consd. [para. 14].

National Bank of Canada et al. v. Merit Energy Ltd. et al., [2001] 10 W.W.R. 305; 294 A.R. 15; 2001 ABQB 583, consd. [para. 16].

Canadian Commercial Bank (Liquidation), Re, [1989] 6 W.W.R. 154; 98 A.R. 353; 61 D.L.R.(4th) 161 (C.A.), consd. [para. 17].

Chromex Nickel Mines Ltd. v. British Columbia Securities Commission (1991), 4 B.L.R.(2d) 189 (S.C.), consd. [para. 18].

Metropolitan Stores (MTS) Ltd. v. Manitoba Food and Commercial Workers, Local 832 and Labour Board (Man.), [1987] 1 S.C.R. 110; 73 N.R. 341; 46 Man.R.(2d) 241, not appld. [para. 23].

RJR-Macdonald Inc. et Imperial Tobacco Ltd. v. Canada (Procureur général), [1994] 1 S.C.R. 311; 164 N.R. 1; 60 Q.A.C. 241, not appld. [para. 23].

Bhattacharya v. St. Boniface General Hospital (2000), 148 Man.R.(2d) 115; 224 W.A.C. 115; 2000 MBCA 51, refd to. [para. 25].

Merck & Co. et al. v. Apotex Inc. (2003), 305 N.R. 68; 227 D.L.R.(4th) 106; 2003 FCA 234, refd to. [para. 25].

T-W Insurance Brokers Inc. v. Manitoba Public Insurance Corp. (1997), 115 Man.R.(2d) 305; 139 W.A.C. 305 (C.A.), refd to. [para. 26].

4849052 Manitoba Ltd. v. Cairns (2005), 207 Man.R.(2d) 7; 2005 MBQB 9, refd to. [para. 26].

Ross v. Ross (1984), 26 Man.R.(2d) 122; 39 R.F.L.(2d) 51 (C.A.), refd to. [para. 27].

Association of Parents Support Groups in Ontario v. York (1987), 14 C.P.R.(3d) 263 (F.C.T.D.), refd to. [para. 29].

Alberta v. Canada (Minister of the Environment) et al. (1991), 46 F.T.R. 40 (T.D.), refd to. [para. 29].

McCullock-Finney v. Barreau du Québec, [2004] 2 S.C.R. 17; 321 N.R. 361; 2004 SCC 36, refd to. [para. 40].

Advanced Mining Systems Inc. v. Fricke (1992), 623 A.2d 82 (Del. Ch. Ct.), refd to. [para. 52].

Elsom v. Elsom, [1989] 1 S.C.R. 1367; 96 N.R. 165, refd to. [para. 56].

Statutes Noticed:

Corporations Act, R.S.M. 1987, c. C-225; C.C.S.M., c. C-225, sect. 119(1) [para. 7]; sect. 119(3) [para. 9].

Authors and Works Noticed:

Tassé, Lyne, Canada Business Corporations Act, Discussion Paper, Director's Liability (1995), generally [para. 43].

Counsel:

D.A. Klein and J.R.N. Boudreau, for the appellant, B. Bellan;

R.A. Dewar, Q.C., and K.R. Wittman, for the receiver, Deloitte & Touche Inc.;

K.A. Filkow, Q.C., and D.M. Stasiuk, for the interveners, C. Curtis, P. Olfert, W. Fox-Decent, L. Baturin, A. Beal, D. Beresford, S. Farley, R. Ziegler, D. Friesen, J. Clarkson and H. Eliasson;

D.A. Primeau, for the intervener, R. Waugh;

M.G. Tadman, for the intervener, R. Hilliard.

This appeal was heard on November 30, 2006, before Monnin, Hamilton and Freedman, JJ.A., of the Manitoba Court of Appeal. The following judgment of the Court of Appeal was delivered by Freedman, J.A., on March 30, 2007.