Supreme Court of Canada
Attorney General of Quebec v. Udeco Inc. et al., [1984] 2 S.C.R. 502
Date: 1984-11-22
Attorney General of Quebec Appellant;
and
Udeco Inc. and Gaston Desmeules Respondents;
and
Prêt Hypothécaire, The Honourable Guy Joron et al. and The Honourable Jacques Parizeau Mis en cause;
and
Attorney General of Canada and Deputy Attorney General for Ontario Interveners.
and between
Laliberté, Lanctôt, Morin & Associés Appellants;
and
Udeco Inc. and Gaston Desmeules Respondents;
and
Prêt Hypothécaire, The Honourable Guy Joron et al. and The Honourable Jacques Parizeau Mis en cause;
and
Attorney General of Canada and Deputy Attorney General for Ontario Interveners.
File Nos.: 17595 and 17622.
1984: May 23, 24; 1984: November 22.
Present: Dickson C.J. and Beetz, Estey, McIntyre, Chouinard, Lamer and Wilson JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR QUEBEC
Constitutional law—Companies—Provincial securities legislation empowering minister to suspend powers of board of directors of company and to appoint provisional administrator—Nature of Minister’s power—Whether power is one of those exercised by the courts referred to in s. 96 of the Constitution—Securities Act, R.S.Q. 1977, c. V-1, s. 112—Constitu-
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tion Act, 1867, s. 96—Code of Civil Procedure, art. 33.
The Quebec Commission des valeurs mobilières held a hearing on the activities and operations of Prêt Hypothécaire and found that the administrative practices and the deterioration in the financial situation of the company tended to depreciate the value of the instruments issued by it. In accordance with s. 112 of the Securities Act, the Minister of Consumer Affairs, Cooperatives and Financial Institutions, following a recommendation by the Commission and after hearing the parties, suspended the powers of the Prêt Hypothécaire board of directors and appointed a provisional administrator to administer the company. Respondents brought a direct action in nullity in the Superior Court to quash the Minister’s order. This action was dismissed. On appeal, the Court of Appeal reversed this judgment and held s. 112 ultra vires the Quebec legislature, in so far as it confers on the Minister the power to suspend the powers of the board of directors of a company trading in securities, and to substitute a provisional administrator therefor. The Attorney General of Quebec and the provisional administrators appealed this decision. This appeal is to determine whether the Quebec legislature infringed s. 96 of the Constitution Act, 1867.
Held: The appeal should be allowed.
The power of the Minister to suspend the board of directors of a company and replace it with a provisional administrator is not unconstitutional. The power exercised by the Minister is an administrative and not a judicial power because there was no real issue between the parties and the Minister’s decision was based not on considerations of legality but on considerations of expediency. These two criteria, referred to in the earlier cases, suffice to determine the nature of this power.
In any case, the power in question is not one of those which was exercised by the Superior Court at the time of Confederation. The superintending and reforming power of that Court over bodies politics and corporate, established by art. 33 C.C.P., has always applied to abuse of authority and fraud. In the present state of the law, a superior court could not suspend a board of directors and substitute another for it based on reasons of economic expediency.
Re Residential Tenancies Act, 1979, [1981] 1 S.C.R. 714; Massey-Ferguson Industries Ltd. v. Government of Saskatchewan, [1981] 2 S.C.R. 413; Attorney General
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of Quebec and Régie du logement v. Grondin, [1983] 2 S.C.R. 364, followed; Minister of National Revenue v. Coopers and Lybrand, [1979] 1 S.C.R. 495; Giroux v. Maheux, [1947] Que. K.B. 163; Re Ashby, [1934] 3 D.L.R. 565; Re Davisville Investment Co. and City of Toronto (1977), 15 O.R. (2d) 553; Hébert v. School Commissioners of St-Félicien (1921), 62 S.C.R. 174; Burland v. Earle, [1902] A.C. 83; Crevier v. Paquin, [1975] C.S. 260; Lagacé v. Lagacé, [1966] C.S. 489; Blitt v. Congregation Ajudath Acham of Sherbrooke (1926), 64 C.S. 303, referred to.
APPEAL from a judgment of the Quebec Court of Appeal, [1983] C.A. 43, 1 D.L.R. (4th) 609, setting aside a judgment of the Superior Court, J.E. 80-924. Appeal allowed.
Jean-K. Samson and Jean Bouchard, for the appellant the Attorney General of Quebec.
Pierre Delisle and Jacques Paquet, for the appellants Laliberté, Lanctôt, Morin et Associés.
No one appearing for the respondents and the mis en cause.
Jean-Claude Ruelland, Q.C., for the intervener the Attorney General of Canada.
Lorraine E. Weinrib, for the intervener the Deputy Attorney General for Ontario.
English version of the judgment of the Court delivered by
CHOUINARD J.—The constitutional question, the only one raised by this appeal, was formulated by an order of Beetz J.:
In view of s. 96 of the Constitution Act, 1867, is s. 112 of the Quebec Securities Act (R.S.Q. 1977, c. V-1) intra vires the Quebec legislature in so far as it empowers the Minister of Consumer Affairs, Cooperatives and Financial Institutions to suspend the powers of the board of directors of a company trading in securities and replace it with a provisional administration?
Section 112 of the Securities Act reads as follows:
112. If the Commission, on an investigation made under section 53, deems that there has been mal-
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feasance, breach of trust or any other misconduct by one or more members of the board of directors or several of its officers, or that such board or person is seriously remiss in the performance of the obligations imposed on it or him by this act or resorts to management practices tending to depreciate the value of the instruments issued by the said company, the Commission shall recommend to the Minister that the powers of such board be suspended and an administrator be appointed.
The Commission may also act in such a way whenever it issues an order under section 80 and also at any time when it deems that the interests of holders of securities must be protected.
Before suspending the powers of such board, the Minister shall give to such company or person the opportunity to make his or its representations.
The administrator shall remain in office until the end of the period for which he has been appointed unless the Minister terminates his mandate sooner.
The administrator so appointed shall have full power to dispose of, alienate and wind up all the property owned by such person or company or held in trust by such person or company on behalf of any other person or company.
The administrator shall, as soon as his mandate has expired, make to the Minister and the Commission a complete report on his findings.
The Minister, as soon as he has received the report of the administrator, may:
(a) dismiss from office the members of the board of directors and order the holding of a special meeting of the shareholders to elect new members of the board; or
(b) order, on the conditions that he determines, the winding-up of the company and appoint a liquidator.
The decision of the Minister ordering the winding-up shall have the same effect as an order made by a judge of the Superior Court under section 25 of the Winding-Up Act (chapter L-4).
Section 53, referred to in s. 112, reads as follows:
53. The Commission may, at any time, on its own authority or following a complaint, make any investigation, question any person, require any information and examine any document or thing, in order to ascertain if a fraudulent act or offence against this act or the regulations has been or is about to be committed.
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It may also authorize in writing any person to hold such investigations for it.
The facts underlying the dispute are summarized as follows by the Attorney General of Quebec in his submission:
[TRANSLATION] Prêt Hypothécaire is a legally established corporation the purposes of which are, inter alia, “to undertake lending and investment operations of all kinds, and in particular, to receive money on deposit and to create and issue receipts, bonds, bills, debentures and notes”.
Accordingly, Prêt Hypothécaire is subject to the Quebec Deposit Insurance Act (R.S.Q. 1977, c. A-26) and the Board created by that Act, from which it had held a permit for several years.
On February 1, 1980 the Quebec Régie de l’assurance-dépôts (the Board) told Prêt Hypothécaire that it intended to suspend its permit on the grounds that “the said company no longer meets the conditions necessary for a permit and is insolvent or on the point of becoming so”. At the same time, the Board invited directors of the company to present their arguments at a hearing set for February 12, 1980.
On February 26, 1980 the Board suspended the permit of Prêt Hypothécaire, due to the deterioration in the company’s financial situation.
Additionally, on March 25, 1980 the Board refused the application for renewal of its permit which Prêt Hypothécaire had previously made in the ordinary course of its business.
On March 26, 1980 the Quebec Commission des valeurs mobilières (the Commission), following a report by one of its officers on the financial situation of Prêt Hypothécaire, ordered that a hearing be held on the company’s activities and operations pursuant to s. 53 of the Securities Act.
In this investigation the Commission found that the administrative practices and the deterioration in the financial situation of Prêt Hypothécaire tended to depreciate the value of the instruments issued by the company.
The Commission accordingly recommended that the Minister of Consumer Affairs, Cooperatives and Financial Institutions suspend the powers of the company’s board of directors and appoint a provisional administrator pursuant to s. 112 of the Securities Act.
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On April 15, 1980, the Minister acted on this recommendation after a hearing of the parties before counsel for the Department of Justice, duly authorized thereto, and made order A-156 suspending the powers of the Prêt Hypothécaire board of directors and making the accounting firm Laliberté, Lanctôt, Morin & Associés responsible for provisional administration, on the ground that “the interests of holders of securities had to be protected”.
From April 15, 1980 onwards, the administrator appointed by the Minister acted as administrator of Prêt Hypothécaire. On June 11, 1980 the administrator signed an affidavit supporting an application for a winding-up order against the company, filed in the Superior Court.
This application, in which the Board was an intervener, was allowed by the Superior Court and affirmed by the Court of Appeal of Quebec in respect of the Board. On March 1, 1983 this Court denied leave to appeal from this decision of the Court of Appeal, ordering the winding-up of Prêt Hypothécaire.
On June 6, 1980 respondents brought a direct action in nullity in the Superior Court to quash, inter alia, the order made by the Minister the effect of which was to suspend the powers of the Prêt Hypothécaire board of directors and to appoint a provisional administrator. The action was dismissed.
Respondents appealed from this judgment. The Court of Appeal of Quebec allowed the appeal and held s. 112 of the Securities Act ultra vires the Quebec legislature, in so far as it confers on the Minister the power to suspend the powers of the board of directors of a company trading in securities, and to substitute a provisional administrator therefor.
The relevant part of the Court of Appeal’s decision is as follows:
[TRANSLATION] FINDS section 112, Securities Act, Revised Statutes of Quebec 1977, c. V-1, ultra vires the provincial legislature in so far as it confers on the Minister of Consumer Affairs, Cooperatives and Financial Institutions of Quebec the power to suspend the directors of a corporation trading in securities and to appoint a provisional administrator therefor;
This is the only power at issue in this appeal. The other powers conferred on the Minister by s. 112, namely the power to dismiss the members of the board of directors from office and order that a special meeting of shareholders be held to elect
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new members of the board, and the power to order the winding-up of the company and appoint a liquidator, are not at issue.
It should be noted that, as long as Prêt Hypothécaire held a permit from the Board, it was exempt from the registration required by s. 24 of the Securities Act. It was exempted by the Regulation excepting certain transactions from the application of section 24 of the Securities Act, R.R.Q. 1981, c. V-1, r. 2, adopted pursuant to s. 101(d) of the Act. The situation was different after the Board suspended the permit, and this was the reason for the intervention by the Commission in spring 1980.
Judgment of the Superior Court
The constitutional question was not raised in the Superior Court, and the judgment is therefore silent on the point.
Judgment of the Court of Appeal
The Court of Appeal had two appeals before it, [1983] C.A. 43, 1 D.L.R. (4th) 609.
One concerned the direct action in nullity dismissed by the Superior Court, J.E. 80-924. The Court of Appeal allowed this unanimously, but for different reasons, those of Malouf J.A., concurred in by Nolan J.A., and those of L’Heureux-Dubé J.A.
The other appeal concerned the winding-up order made by the Superior Court, [1980] C.S. 992, at the request of the administrators of Prêt Hypothécaire on the one hand and at the request of the Régie de l’assurance-dépôts on the other, which had made an aggressive intervention. In view of its decision finding the disputed power under s. 112 of the Securities Act unconstitutional and vacating the appointment of appellants Laliberté, Lanctôt, Morin & Associés as administrators of Prêt Hypothécaire, the Court of Appeal accordingly quashed the winding-up order made at their request. However, the Court of Appeal affirmed the winding-up order made at the request of the Régie de l’assurance-dépôts. This Court denied leave to appeal from this judgment, [1983]
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1 S.C.R. vii, and it accordingly only has before it the appeal raising the constitutional question, namely regarding the direct action in nullity.
Parties and Interveners
With leave of this Court, the Attorney General of Quebec and the administrators appointed by the Minister, Laliberté, Lanctôt, Morin & Associés, who were sued personally, appealed from the judgment of the Court of Appeal. In their submission, the administrators adopted the argument of the Attorney General of Quebec. In essence they did so at the hearing as well.
The Attorney General of Canada and the Attorney General for Ontario intervened in support of the appellants.
Arguments Made
In Re The Residential Tenancies Act, 1979, [1981] 1 S.C.R. 714, this Court developed a threefold criterion for determining whether a statute is consistent with the provisions of s. 96 of the Constitution Act, 1867. This criterion was summarized by Laskin C.J. in Massey‑Ferguson Industries Ltd. v. Government of Saskatchewan, [1981] 2 S.C.R. 413, at p. 429, as follows:
1. Does the challenged power or jurisdiction broadly conform to the power or jurisdiction exercised by Superior, District or County Courts at the time of Confederation?
2. Is the function of the provincial tribunal within its institutional setting, a judicial function, considered from the point of view of the nature of the question which the tribunal is called upon to decide or, to put it in other words, is the tribunal concerned with a private dispute which it is called upon to adjudicate through the application of a recognized body of rules and in a manner consistent with fairness and impartiality?
3. If the power or jurisdiction of the provincial tribunal is exercised in a judicial manner, does its function as a whole in its entire institutional context violate s. 96?
However, in Re The Residential Tenancies Act, 1979, supra, before the statement of the rule there
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is the following passage, at p. 730, in the reasons of Dickson J., speaking for the Court:
The same process of liberalization, this time in the context of a transfer of jurisdiction from a Superior Court to an administrative tribunal, was initiated by the Privy Council in Labour Relations Board of Saskatchewan v. John East Iron Works, Limited, [1949] A.C. 134. Lord Simonds proposed a two-fold test. The first limb of the test is to ask whether the board or tribunal exercises “judicial power”. Lord Simonds did not propose a ‘final’ answer to the definition of “judicial power”, but he suggested that,
…the conception of the judicial function is inseparably bound up with the idea of a suit between parties, whether between Crown and subject or between subject and subject, and that it is the duty of the court to decide the issue between those parties, with whom alone it rests to initiate or defend or compromise the proceedings, (p. 149)
If the answer to the initial question as to “judicial power” is in the negative, then that concludes the matter in favour of the provincial board. If, however, the power is in fact a judicial power, then it becomes necessary to ask a second question: in the exercise of that power, is the tribunal analogous to a superior, district or county court?
Relying on this passage, the Attorney General of Quebec submitted that the Court should first consider the initial question of whether the Minister’s power is a judicial one, as this Court did in connection with the power to fix rents in Attorney General of Quebec and Régie du logement v. Grondin, [1983] 2 S.C.R. 364, at pp. 376-77. The Attorney General of Quebec submitted that the initial question should be given a negative answer, because there is no real lis between the parties in the case at bar and because the Minister’s decision is based on considerations of expediency rather than on considerations of legality. The Attorney General of Quebec further submitted that the power in question is not one which was exercised by the Superior Court at the time of Confederation.
The Attorney General of Canada and the Attorney General for Ontario, for their part, proceeded to examine in turn the three aspects of the criterion, relying essentially on the same arguments as the Attorney General of Quebec.
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A twofold common proposition may be derived from the argument of the Attorneys General: this is not a judicial power, and still less is it a power exercised by the Superior Court in 1867.
Nature of the Minister’s Power
R. Dussault, in his Traité de droit administratif canadien et québécois, 1974, tome II, writes at p. 1236:
[TRANSLATION] Accordingly, anyone looking in the Canadian and Quebec cases for a cogent and consistent definition of judicial power is likely to be disappointed.
The case law reviewed by the writer nonetheless contains a number of criteria by which a given power may be classified. These criteria are grouped by G. Pépin and Y. Ouellette, in Principes de contentieux administratif, 2nd ed., 1982, under the following headings: the organic criterion; the criterion of the firm decision; the criterion of the basis for the decision; the criterion of the decision affecting rights; the criterion of the judicial process; and considerations of public policy.
This is not to say that a power must be examined in each case in light of each of the given criteria in order to determine its nature: but that, depending on the circumstances, one or more of these criteria should be used in arriving at a conclusion.
As we have seen, in the case at bar appellants and the interveners submitted that the Minister’s power to suspend the board of directors and substitute a provisional administrator therefor is not a judicial power because there is no real lis between the parties, and because the basis of the Minister’s decision was not legality but expediency.
I repeat the passage cited above from Lord Simonds:
…the conception of the judicial function is inseparably bound up with the idea of a suit between parties, whether between Crown and subject or between subject and subject, and that it is the duty of the court to decide the issue between those parties, with whom alone it rests to initiate or defend or compromise the proceedings.
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In Re The Residential Tenancies Act, 1979, supra, Dickson J. wrote at p. 743:
I have already indicated that the hallmark of a judicial power is a lis between parties in which a tribunal is called upon to apply a recognized body of rules in a manner consistent with fairness and impartiality. The adjudication deals primarily with the rights of the parties to the dispute, rather than considerations of the collective good of the community as a whole.
In Minister of National Revenue v. Coopers and Lybrand, [1979] 1 S.C.R. 495, commenting on the decision of the Minister to authorize a seizure, Dickson J. wrote at pp. 506-07:
The decision of the Minister does not involve the adversary process. It is not the “triangular” case of A being called upon to resolve a dispute between B and C. There is a dispute but not in an adversarial sense. The analogy of a court is entirely inappropriate. There are no curial procedural rules imposed by the legislation.
In Giroux v. Maheux, [1947] Que. K.B. 163, Pratte J.A. of the Court of Appeal wrote at p. 168:
[TRANSLATION] Whatever tribunal renders it, a judicial decision does not create rights: it only recognizes those found by the tribunal to exist. Such a decision results solely from examining the facts in light of the law. The latter creates the rights, and the tribunal recognizes them. This recognition results from the application to the facts of an objective standard, which is independent of the tribunal itself and which it may not alter in any way: the law. The power to decide otherwise is not in any way a judicial power.
In Re Ashby, [1934] 3 D.L.R. 565, Masten J.A. of the Ontario Court of Appeal at p. 568 quotes the following passage from an article by D.M. Gordon, “Administrative Tribunals and the Courts”, (1933) 49 L.Q. Rev. 94, at pp. 106-08:
A tribunal that dispenses justice, i.e. every judicial tribunal, is concerned with legal rights and liabilities, which means rights and liabilities conferred or imposed by law; and “law” means statute or long-settled principles. These legal rights and liabilities are treated by a judicial tribunal as pre-existing; such a tribunal professes merely to ascertain and give effect to them; it investigates the facts by hearing “evidence” (as tested by long-settled rules), and it investigates the law by consulting precedents. Rights or liabilities so ascertained cannot, in theory, be refused recognition and enforce-
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ment, and no judicial tribunal claims the power of refusal….
In contrast, non-judicial tribunals of the type called “administrative” have invariably based their decisions and orders, not on legal rights and liabilities, but on policy and expediency.
…
A judicial tribunal looks for some law to guide it; an “administrative” tribunal, within its province, is a law unto itself.
In Re Davisville Investment Co. and City of Toronto (1977), 15 O.R. (2d) 553, the Court had to consider an application for judicial review of a decision by the Lieutenant Governor in Council directing that a new public hearing be held by the Ontario Municipal Board. The power of the Lieutenant Governor in Council proceeds from s. 94(1) of The Ontario Municipal Board Act, R.S.O. 1970, c. 323, reading as follows:
94.—(1) Upon the petition of any party or person interested, filed with the Clerk of the Executive Council within twenty-eight days after the date of any order or decision of the Board, the Lieutenant Governor in Council may,
(a) confirm, vary or rescind the whole or any part of such order or decision; or
(b) require the Board to hold a new public hearing of the whole or any part of the application to the Board upon which such order or decision of the Board was made,
and the decision of the Board after the public hearing ordered under clause b is not subject to petition under this section.
In the reasons of the majority, at pp. 555, 556 and 557 respectively, there are the following passages cited in Attorney General of Canada v. Inuit Tapirisat of Canada, [1980] 2 S.C.R. 735, at pp. 751-52:
The petition does not constitute a judicial appeal or review. It merely provides a mechanism for a control by the executive branch of Government applying its perception of the public interest to the facts established before the Board, plus the additional facts before the Council. The Lieutenant-Governor in Council is not concerned with matters of law and jurisdiction which are within the ambit of judicial control. But it can do what Courts
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will not do, namely, it can substitute its opinion on a matter of public convenience and general policy in the public interest. This is what was done by the Order in Council: if it was done without any error of law, or without defects of a jurisdictional nature, the Divisional Court had no power to interfere and properly dismissed the application before it.
…
Section 94 of The Ontario Municipal Board Act should not be construed restrictively as if it involved an inferior tribunal to which certain matters have been committed by the Legislature. I prefer to regard the power as one reserved by the legislative to the executive branch of Government acting on broad lines of policy. There is no reason to fetter and restrict the scope of the power by a narrow judicial interpretation.
There is no question that the purpose of the Securities Act, supra, is to protect investors. In pursuit of this purpose, the Act confers wide powers of supervision and control on the Commission des valeurs mobilières and the Minister.
The principal provisions of this Act, as they stood at the time in question, should be briefly examined.
When it has to make a decision, the Commission follows the same rules as most administrative tribunals in Quebec which have similar powers. In the decision-making process, it has discretion to determine the rules applicable to hearings (s. 12). It may review its own decisions and those of the Director. An appeal lies to three judges of the Provincial Court (s. 17). A decision by that Court is final. The Commission benefits from the protection of a privative clause excluding extraordinary recourses under the Code of Civil Procedure and the superintending and reforming power of the Superior Court (s. 18). This is the usual form of an administrative tribunal exercising quasi-judicial powers.
Section 24 requires the registration of persons trading in securities, such as brokers, issuers, salesmen, employees and officer-agents. Anyone who performs the acts in question, and is not registered
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or whose registration has been suspended, commits an offence. There are certain exceptions, in particular those referred to in ss. 28-30. The granting and renewal of registrations is at the discretion of the Director (s. 32). However, he must give a person to whom a registration has been denied an opportunity to be heard (s. 33). A registration may be suspended, cancelled or revoked (s. 36).
Section 52 lists the acts which may constitute a fraud within the meaning of the statute, such as intentional misrepresentation, unjustifiable commissions, unreasonable promises, breaches of trust, false statements, artifices and stratagems.
Sections 64, 66, 68, 70-72, 75 and 80 create offences in the regulation of brokerage. For example, failure to give written confirmation of a transaction, failure by a broker to keep a record, not issuing a prospectus, engaging in the trade of securities without receiving a written notice of registration as a broker and failure to comply with an order prohibiting trade in securities constitute offences.
Section 130 creates an offence in the case where an individual fails to comply with the requirements regarding disclosure of financial information. Section 178 does so for failure to comply with the rules regarding insider trading.
Section 180 creates a general offence committed by anyone refusing to comply with a decision of the Commission or the Director.
The Act thus indicates both what constitutes a fraud and what is an offence in respect of securities trading.
An important power of investigation is vested in the Commission. The purpose of its investigation is to ascertain if any fraudulent act or offence has been or is about to be committed (s. 53). A person may be prosecuted for such acts. The prosecution
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in such a case is governed by the Summary Convictions Act, R.S.Q., c. P-15, ss. 102-109.
Following an investigation under s. 53, the board of directors of the company in question may, under s. 112, be suspended after a proceeding in which the Commission and the Minister ensure that the interests of holders of securities have been protected. Under the latter section, the Commission has a duty to recommend that the Minister suspend the board of directors and appoint a provisional administrator in three cases: when there has been malfeasance, breach of trust or any other misconduct; when anyone has been seriously remiss in the performance of obligations imposed by the Act; and when the Commission finds the existence of management practices tending to depreciate the value of the instruments issued. The Commission may make the same recommendation, though it is not required to, in two cases: when it issues an order to prohibit trading in securities; and at any time when it deems that the interests of holders of securities must be protected.
Section 112 also establishes that a company whose board of directors may be suspended is entitled to a hearing.
The Lieutenant Governor in Council has wide regulatory powers conferred by s. 101. He may, inter alia, adopt regulations determining what constitutes a fraudulent act, exempting trading in any classes of securities from the necessity of registration, determining the form and content of any prospectus, and in general, any regulation considered desirable to implement the Act.
Finally, the Minister of Consumer Affairs, Cooperatives and Financial Institutions is responsible for applying the Act (s. 181).
This is the context in which one must consider the Minister’s power to suspend a board of directors and substitute provisional administrators for it, namely, in terms of the protection of investors at all times.
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In the case at bar the Régie de l’assurance-dépôts, following a hearing at which Prêt Hypothécaire was represented, suspended the latter’s permit on the ground that, in view of its financial situation, it no longer fulfilled “the conditions required for obtaining a permit” (Deposit Insurance Act, R.S.Q. 1977, c. A-26, s. 31).
The Commission des valeurs mobilières then instituted an investigation and reported to the Minister who, after a hearing of Prêt Hypothécaire by the Minister’s representative, made his order suspending the board of directors and appointing provisional administrators. The Minister’s order mentioned the following facts:
[TRANSLATION] (a) several large loans were made without sufficient security, and without an adequate study being prepared in the ordinary course of business, including an appraisal of the debtors’ ability to repay;
(b) large loans, repayment of which is uncertain, were made to companies not at arm’s length;
(c) there are considerable arrears on a large number of currently outstanding loans;
In light of the criteria indicated, in particular that there was no real lis between the parties and that the Minister’s decision was based not on considerations of legality but on considerations of expediency, namely the loan policy and financial situation of Prêt Hypothécaire, it has to be concluded, in my opinion, that the Minister’s power is not a judicial power but an administrative one, and that in constitutional terms, therefore, it was validly conferred.
It is true that, as L’Heureux-Dubé J.A. of the Court of Appeal observed, a similar power cannot be found in other provincial statutes on securities. Thus, for example, in Ontario the corresponding power is conferred on the Supreme Court by s. 17 of the Securities Act, R.S.O. 1980, c. 466.
There are however other statutes in Ontario by which a similar power is conferred on the Lieutenant Governor in Council, a Minister or a public servant.
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Thus, section 116 of the Credit Unions and Caisses Populaires Act, R.S.O. 1980, c. 102, authorizes the Ontario Share and Deposit Insurance Corporation to order that the property of a credit union be taken possession of when its affairs are not in a satisfactory financial condition.
Section 34 of the Ontario Deposit Insurance Corporation Act, R.S.O. 1980, c. 328, gives the Lieutenant Governor in Council the power, in certain circumstances, to order the Corporation to take possession of the property of a member institution, to conduct the business thereof and to exercise all the powers of the board of directors.
Section 39 of the Insurance Act, R.S.O. 1980, c. 218, authorizes the superintendent to take possession of and control for a limited time any assets of an insurer when the superintendent is satisfied that such assets cannot be satisfactorily accounted for.
Section 7 of the Health Facilities Special Orders Act, 1983 (Ont.), c. 43, gives the Minister the power to take control of and operate a health facility for a six-month period in certain circumstances.
Sections 158(3) and 159(1) of the Loan and Trust Corporations Act, R.S.O. 1980, c. 249, authorize the Lieutenant Governor in Council in certain circumstances to order the Registrar to take possession of the assets of a corporation, to conduct its business and to exercise the powers of the board of directors.
Similarly, in Alberta the Minister enjoys a similar power to suspend a board of directors and substitute provisional administrators for it, under the Trust Companies Act, R.S.A. 1980, c. T‑9, ss. 184-186.
In Quebec, the Securities Act, supra, is in any case not the only one to grant a similar or analogous power. When it was adopted in 1962 the Hospitals Act, R.S.Q. 1964, c. 164, provided in ss. 16 and 17:
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16. The Lieutenant-Governor in Council may charge a person designated by him to inquire into any matter relating to the management or operation of a hospital.
The person so designated shall have, for the purposes of the inquiry, the powers and immunities of a commissioner appointed under the Public Inquiry Commission Act (Chap. 11).
17. Whenever an inquiry is ordered under the preceding section, the Lieutenant‑Governor in Council may order that the powers of the board of management of the hospital be suspended and appoint an administrator to exercise its powers for the duration of the inquiry.
The Act respecting Health Services and Social Services, R.S.Q., c. S-5, which replaced the Hospitals Act, contains much more elaborate provisions but still includes in s. 163 a power for the Minister to take over provisional administration of a hospital.
Finally, reference need only be made to the following statutes, without in so doing expressing any opinion as to the validity of each of the relevant provisions, as it is not necessary: the Education Act, R.S.Q., c. I-14, s. 14; the Act respecting Insurance, R.S.Q., c. A-32, ss. 378, 379 and 387; the Savings and Credit Unions Act, R.S.Q., c. C-4, s. 103; the Act respecting security fund corporations, R.S.Q., c. C-69.1, ss. 59 and 62; the Act respecting the sociétés d’entraide économique, R.S.Q., c. S-25.1, ss. 150 and 151.
The Minister’s Power and the Superintending and Reforming Power of the Superior Court
The foregoing suffices to dispose of the appeal. However, the Attorney General of Quebec, in my view correctly, added that the power in question is not one which was exercised by the Superior Court at the time of Confederation in 1867.
The superintending and reforming power of the Superior Court over bodies politic and corporate, established by art. 33 of the Code of Civil Procedure, has always applied to abuse of authority and fraud, or in the expression often used, injustice amounting to fraud.
In Hébert v. School Commissioners of St-Félicien (1921), 62 S.C.R. 174, the Court had
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to consider an action against school commissioners to vacate a resolution providing for the purchase of a hotel to be converted into a school. Brodeur J. said the following, at p. 180:
[TRANSLATION] The Superior Court is not a court of appeal from the decisions of school commissioners. The jurisdiction of the Superior Court over school matters is given to it by art. 50 of the Code of Civil Procedure. It is a superintending and reforming power only, quite different from the powers of a court of appeal. A court of appeal substitutes its opinion on the merits of the case for the opinion of the Court which rendered the original judgment, whereas the Superior Court, under art. 50 C.C.P., has no right to trench on the powers which belong exclusively to the school commissioners, and to substitute its opinion for theirs on the merits of their orders made in due form and within the limits of their jurisdiction…
Thus, in the case at bar the Circuit Court would have had full jurisdiction to inquire into the injustice of the impugned resolution, but all the Superior Court can do is to consider whether the school corporation acted outside its powers, committed an illegal act, or whether the impugned resolution constitutes an absolute denial of justice.
In Droit québécois des corporations commerciales, Judico, 1977, vol. 3, James Smith writes at p. 1771:
[TRANSLATION] 3. In principle, the courts refuse to intervene in the internal management of companies except for the purpose of quashing an act which is fraudulent or ultra vires the company.
In Burland v. Earle, [1902] A.C. 83, Lord Davey wrote at p. 93:
It is an elementary principle of the law relating to joint stock companies that the Court will not interfere with the internal management of companies acting within their powers, and in fact has no jurisdiction to do so.
A little further on he added, on the same page:
The cases in which the minority can maintain such an action are, therefore, confined to those in which the acts complained of are of a fraudulent character or beyond the powers of the company.
In F.W. Wegenast, The Law of Canadian Companies, Burroughs, 1931, it states at p. 775:
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Remedies for most cases of corporate irregularity were formerly to be found in the writs of mandamus and quo warranto issued by the Court of King’s Bench. For, notwithstanding some expressions to the contrary, the superior courts have inherent jurisdiction to correct abuses in the internal conduct of corporations, this jurisdiction being based on principles similar to those which enable the superior courts to review the process of inferior courts. Thus it has been said that “it is the office and province of the Court of Queen’s Bench to exercise a control and supervision over the proceedings of corporations, to preserve order in their acts, to enforce attention to the provisions of their constitution, and to repress irregularities both in their acts and proceedings”.
Finally, I refer to the following cases cited by the Attorney General of Quebec in his submission: Crevier v. Paquin, [1975] C.S. 260, at pp. 263-65; Lagacé v. Lagacé, [1966] C.S. 489, at pp. 491-93; Blitt v. Congregation Ajudath Acham of Sherbrooke (1926), 64 C.S. 303, at p. 306.
I do not see by what authority, even now, the Superior Court could suspend a board of directors and substitute another for it based on reasons of economic expediency, commercial practice in securities trading, in particular loan policy, and the protection of investors, unless the legislator conferred this power on it as is the case in Ontario.
This power is not a judicial one. It is an administrative power, which enables the Minister to impose conservatory measures on a temporary basis. It is not a power of the type exercised by the Superior Court at the time of Confederation.
For these reasons, I would answer the constitutional question in the affirmative.
I would allow the appeal, set aside the judgment of the Court of Appeal and affirm the dismissal of the action in nullity by the Superior Court. Appellants Laliberté, Lanctôt, Morin & Associés shall be entitled to their costs throughout. No costs were sought by the Attorney General of Quebec. There will be no costs for or against the interveners.
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Appeal allowed.
Solicitors for the appellant the Attorney General of Quebec: Jean-K. Samson and Jean Bouchard, Ste-Foy.
Solicitors for the appellants Laliberté, Lanctôt, Morin & Associés: Pierre Delisle and Jacques Paquet, Ste-Foy.
Solicitor for the intervener the Attorney General of Canada: James M. Mabbutt, Ottawa.
Solicitor for the intervener the Deputy Attorney General for Ontario: Archie Campbell, Toronto.