Written By Scott Bower, Michael Theroux, Ciara Mackey and Katherine Fisher
Despite finding a clear error resulting in warrant holders being deprived of meeting and voting rights under a court-approved plan of arrangement, the Alberta Court of Appeal declined to grant relief and unwind the underlying transaction once it had closed: Taiga Gold Corp v Munday, 2023 ABCA 12. This recent appeal highlights the unwillingness of the courts to unwind a completed transaction and the importance of seeking interim relief to preserve the status quo in the event of a dispute about the proper approval of a plan of arrangement.
The case involved a plan of arrangement approved pursuant to section 193 of the Alberta Business Corporations Act, RSA 2000, c B-9 for Taiga Gold Corp., a mineral exploration company publicly traded on the Canadian Securities Exchange. Under the arrangement, SGO Mining Inc. was to acquire all of Taiga's shares, warrants and options.
Taiga sought an ex parte interim order from the Alberta Court of King's Bench to set a date for shareholders to vote on a resolution to approve the arrangement. Taiga did not advise the Court there were warrant holders who opposed the arrangement, who may have been entitled to notice of the meeting and to vote on the proposed transaction. The Court provided direction regarding shareholder notices, conduct of the meeting and dissent rights, but set no meeting or rights for the warrant holders.
At the meeting, just over 85 percent of the voting shareholders voted to approve the arrangement. The following day, Taiga sought final court approval. The appellant warrant holders opposed, arguing that the required statutory procedures had not been followed, that their rights would be extinguished by the transaction, and that there had been unequal treatment as between the shareholders and warrant holders.
In Taiga Gold Corp (Re), 2022 ABQB 290, the chambers judge agreed that a meeting of the warrant holders should have been held prior to approving arrangement, but concluded that an opposing vote by the outstanding warrants could not have affected the outcome. The chambers judge also determined that the price offered to warrant holders and shareholders was fair and treated the groups equally.
The warrant holders appealed the approval of the arrangement, asking the Court of Appeal to either amend the approved and completed arrangement to provide the warrant holders with dissent rights and allow them to be paid full value on their warrants (to be determined in a separate evidentiary hearing), or carve out an exception to allow them to sue on the warrants despite the arrangement agreement.
Appeal By Warrant Holders Dismissed By the Alberta Court of Appeal
The Court of Appeal agreed that the chambers judge erred in approving the arrangement without a meeting and vote of warrant holders, as required by section 193(4)(b) of the Act. The Court, led by Chief Justice Khullar, explained: "Without a meeting, the appellants and other warrant holders lost the opportunity to try to convince the shareholders to vote against the arrangement. This democratic process was enshrined in the statute [emphasis added]."
However, the Court dismissed the appeal. The relief sought by the warrant holders would have required a partial unwinding of the transaction, which the Court noted it had no clear authority to do. The Court had no way of determining whether the transaction would have proceeded had either of the requested changes been made prior to completion, and was unwilling to change terms that may have been critical to the agreement. As a key practice point, the Court noted that to preserve the ability to receive an effective remedy on appeal, "it would have been wise to apply to the chambers judge or a justice of this Court for a stay pending appeal, regardless of the tight timelines involved."
The final outcome also weighed against giving the warrant holders extraordinary relief. The Court concluded that there was sufficient evidence of value before the chambers judge and the arrangement was fair and reasonable for both warrant holders and shareholders.
Looking Ahead—Preserving Remedies
This new appellate decision demonstrates that courts remain reluctant to unwind, even partially, completed commercial transactions. Although statutory procedural requirements and the democratic process enshrined under the Business Corporations Act had failed, the court did not take back the transaction, order a new vote or grant new rights under the court-approved plan of arrangement. To preserve their rights, including voting and participation rights, parties challenging an approved plan of arrangement should consider seeking a stay pending appeal to defer completion of the transaction.