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law-books-gavelGetting legal advice on how a statute, regulation or contract is likely to be interpreted by a court is usually a sound idea on any significant business decision.  What may appear straightforward  is not always as non-lawyers would expect.  For example, in some cases, the word “may” is used.  Usually, that would set out the something was permissible, not that it was required.  But context and purpose govern and in some situations “may” can become “must”.  In an old case, Julius v. Oxford (Lord Bishop) (1880), 5 App. Cas. 214 at 222-23 (H.L.), Lord Cairns said:

“But there may be something in the nature of the thing empowered to be done, something in the object for which it is to be done, something in the conditions under which it is to be done, something in the title of the person or persons for whose benefit the power is to be exercised, which may couple the power with a duty, and make it the duty of the person in whom the power is reposed, to exercise that power when called upon to do so.”

So “may” can be “must”, if the circumstances require that interpretation.  This context is likely to arise where an official is given a power to decide something when an application is made.  A decision is required, even if the official is still left with the power to decide “yes” or “no” about what is being sought.

Similarly, “must” may not always mean “must” and can end up meaning  “may”.  Common sense tells us that “must” means that someone is obliged to do something.  But if they are simply incapable of doing so, are they still obliged to do it?  And if the circumstances are different from what appears to have been contemplated originally, should “must” still apply?  Fortunately, the law allows – at least sometimes – for there to be lawful excuses for non-performance and allows as well for explanations of how the context of one situation differs, making a supposed obligation inapplicable.

With business corporations, the law sets out a number of “musts” that the corporation or its directors or shareholders have to do.  But the statute is written for a vast array of different kinds of companies, from small to large, from profitable to not, from sophisticated to less so.  As a result, it is key to look beyond the “musts” and into whether the law has provided for a consequence for failure to perform and any escape hatches that allow for “lawful excuses” for non-performance.

The BC Business Corporations Act has a general enforcement provision in section 228(2), which reads as follows:

 (2) If a company or any director, … contravenes or is about to contravene a provision of this Act … a complainant may, … apply to the court for an order that the person who has contravened or is about to contravene the provision comply with or refrain from contravening the provision.

Where the statute sets out a “must” for a corporation, director, officer or shareholder, and where there is an alleged “contravention” (i.e., a failure to perform what was required), the law allows some flexibility.  It says in section 228(3) that the “the court may make any order it considers appropriate, including an order (a) directing a person referred to in subsection (2) to comply with or to refrain from contravening a provision referred to in that subsection…”

Courts tend to regard orders that someone “must” do something as being akin to injunctions.  Injunctions are orders that require someone to do something or stop doing something.  Mandatory injunctions are often seen as being more onerous.  The simple reason is that telling someone to stop doing something that interferes with another’s rights is usually less intrusive an order than telling someone that he or she has to perform some act.  A case has to be clearly made out to justify a mandatory injunction.

In Allard v. Shaw Communications Inc., 2010 ABCA 316 at paras. 28-34, the court ruled that applications to enforce company legislation were equivalent to applications for mandatory injunctions and that the “may” language in the statute about the court’s powers made such orders discretionary.  They were thus open to being refused in a proper case, even if the bare minimum requirements under the statutory “must” that someone had to do something were established.  That case involved someone trying to get a list of shareholders where the company involved had reasonable suspicions that the list would not be used for proper purposes.  The court refused to make the order that the list be provided.

Along the way, the court said that an order could be withheld:

  • In the interests of justice or fairness
  • Where there would be “no substantive useful benefit, except a negotiating advantage because of the harm done by the injunction to the person enjoined”
  • Where the order would be “oppressive, harsh, illegal, or against public policy”
  • Where the applicant for the order lacked “clean hands” (i.e., was acting unlawfully or inequitably), or
  • Where the order would likely be used for or would further an “illegal purpose”.

In Capital Regional District v. Smith (1998) 168 D.L.R. (4th) 52 (B.C.C.A.), the BC Court of Appeal refused to order that a house be torn down even though it had been built in violation of municipal building requirements.  A previous, similar building on the property had burnt down.  The owner re-built, but did so without complying with newly applicable building bylaws.  The district had not stopped work before the building was completed. The court thought ordering destruction would serve no useful purpose, particularly where what had been built was similar to what had been in place before the fire.  It refused the district’s application.  The court stressed that it would be a rare case where it would refuse a public authority an enforcement order about a public law.  But still, where such an order would be harsh and oppressive, the court decided it could refuse.

Red Line Enterprises Ltd. v. Six Mile Pub Ltd. 2012 BCSC 628 is an example of a case where the court refused to order that a company provide audited financial statements as a historical matter, although it did make an order that for the future such statements were to be provided.  The court noted that the parties had conducted business so that it would be unfair going back and retroactively requiring strict compliance with the Business Corporations Act.  But for the future, where there appeared to be no lawful excuse or reason otherwise, compliance was required.

These cases show that even a statutory “must” can become a “may” where judicial discretion is exercised as to whether to issue an enforcement order.  Given the vast array of circumstances that can arise making an order more or less appropriate, and given that the consequences of violating a court order include the possibility of holding someone in contempt, it is sound policy and law for such discretion to exist.

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