TORONTO – The Ad Hoc Committee of the 1976 and 1996 Bell Canada debentureholders said late Monday it has launched appeals against the court judgments rendered on March 7, 2008 by the Quebec Superior Court of Justice.
The decision granted permission for the proposed leverage buyout of BCE Inc. by a consortium led by the Ontario Teachers’ Pension Plan Board ("Teachers") and dismissed the bondholders’ proceedings contesting the Plan of Arrangement, “seeking enforcement of their contractual protections and for oppression remedies. Inscriptions in appeal were filed today with the Quebec Court of Appeal in Montreal,” reads the committee’s press release.
"The legal teams have studied the judgments carefully and believe that there are strong grounds of appeal on both legal and factual issues," said John Finnigan of the Toronto law firm ThorntonGroutFinnigan LLP, one of the lawyers representing the Committee.
A key legal determination in the judgments “was the finding that corporate directors have a fiduciary duty to maximize shareholder value when a company is ‘put in play’. Mr. Justice Silcoff adopted and applied an American case on director’s obligations in reaching this conclusion. The Committee believes that this finding is at odds with the decision of the Supreme Court of Canada in the 2004 case of Peoples Department Stores Inc. (Trustee of) v. Wise in which it was held that corporate directors owe their obligations to the corporation, not just the shareholders, and that the directors’ fiduciary obligations never shift to the shareholders,” continues the release.
"We believe, with all due respect to Mr. Justice Silcoff, that his finding on this point is not consistent with the binding authority of the Supreme Court of Canada in the Peoples case and that it is not appropriate for a Canadian court to adopt U.S. law in these circumstances," added Finnigan.
“A key fact in support of the debentureholders’ position is that the board of directors of Bell Canada never met to consider whether Bell’s assumption of responsibility to repay the $34 billion in acquisition debt was in the best interests of Bell Canada. The Committee believes that the assumption of $34 billion in debt for no consideration to Bell is manifestly not in the best interests of Bell. As a result of the agreement by Bell to assume responsibility for repayment of the $34 billion acquisition debt, the credit ratings on Bell bonds fell from investment grade to junk status and the value of Bell Canada bonds fell between 19 and 23 percent,” adds the release, which outlines other issues on which the committee believes the judge erred.
“While Committee members were disappointed with the outcome of the judgments, they believe that they have good grounds for relief and are determined to pursue their appeal rights to obtain a favourable ruling on their claims,” reads the release.
Bell, on the other hand, has another opinion.
"Our position from the start, which was supported on every point of contention by the Québec Superior Court, is that the claims of these debentureholders are without merit," said Martine Turcotte, chief legal officer of BCE and Bell Canada. "We will vigorously defend that position in the Court of Appeal and believe that the Superior Court’s decisions will be upheld. As the Superior Court has concluded, BCE and Bell Canada have respected all of the rights and reasonable expectations of the debentureholders.”
The remaining conditions to the closing of the privatization transaction include the required approvals of the CRTC and Industry Canada. As previously disclosed, BCE expects the transaction to close in the first part of the second quarter of 2008, subject to the timing of the appeals.
