In Taiga Gold Corp v. Munday, the Alberta Court of Appeal was unwilling to grant relief to warrant holders who had been potentially prejudiced by the approval of plan of arrangement notwithstanding their finding that there was an error in the decision of the lower Court in the application to approve that arrangement. The Court of Appeal was unwilling to grant relief that would have required an unwinding of a concluded transaction. The failure of the appellants to seek a stay of the underlying decision while awaiting an appeal left them without the relief sought despite successfully arguing before the appeal court that the approval of the plan of arrangement had been granted in error.
SGO Mining Inc. ("SGO") proposed to acquire shares, warrants, and options of Taiga Gold Corp ("Taiga") held by third parties. That transaction was to occur subject to a Court-approved plan of arrangement (the "Arrangement") under section 193 of the Alberta Business Corporations Act (the "Act"). At the time of the proposed Arrangement, Taiga was a mineral exploration company publicly traded on the Canadian Securities Exchange. Taiga sought an ex parte and interim order setting the date for shareholders to consider and vote upon a resolution to approve the proposed Arrangement. Taiga did not advise the Court in the process of that application that there were warrant holders opposing the proposed Arrangement who may be entitled to notice of the meeting and to vote on the proposed transaction. The Court set the meeting for the shareholders and provided directions on notice, conduct of the meeting and dissent rights. The Court also set the hearing to consider final approval of the Arrangement but did not provide any guidance for warrant holders.
The shareholder meeting took place and a majority of Taiga's shareholders exercised their right to vote and approve the Arrangement. The following day, Taiga applied to the Court for its approval. The appellants, some of the warrant holders in Taiga, opposed the application and argued that Taiga had not met the test for approving the plans for the Arrangement, statutory procedures had not been followed, the arrangement would extinguish the warrant holders' contractual rights, and that Taiga treated shareholders and warrant holders unequally. The chambers judge concluded that the warrant holders' legal rights would be affected by the proposed Arrangement and found their legal rights were defined by terms and conditions of their warrants provided for in the warrant certificates. However, the chambers judge concluded that an opposing vote by the holders of the outstanding warrants would not have made a material difference to the outcome and further held that the price offered to warrant holders and shareholders was fair because the groups were treated equally. As a result, the Arrangement was approved and the transaction with SGO was subsequently concluded.
The appellants appealed the decision of the chambers judge approving the Arrangement. In that appeal, the warrant holders suggested the remedies available to them were either an amendment of the Arrangement to allow them to be paid in full for their warrants or the removal of restrictions in the Arrangement to allow them to allow them to initiate legal proceedings in connection with their warrant rights. The Court of Appeal agreed with the appellants that the chambers judge erred in approving the Arrangement without a required meeting and vote of warrant holders. Section 193(4)(b) of the Act required the meeting of the warrant holders given that the appellant's legal rights were affected by the Arrangement. The statutory language contained within s.193(4)(b) of the Act was mandatory and not permissive, meaning the chambers judge had no authority to approve the Arrangement. The Court of Appeal found that there was no discretion to approve a plan of arrangement under the Act until after the requisite meeting had occurred and stated that the chambers judge should have delayed the final approval hearing and ordered that the required meeting of warrant holders be held in the interim. The Court of Appeal stressed that the democratic process reflected in the s. 193(4)(b) requirements was enshrined in the Act and that the appellants and other warrant holders had lost the opportunity to try to convince shareholders to vote against the Arrangement thereby violating that democratic process.
Despite the Court of Appeal's views on the underlying decision of the chambers judge, it recognized that the relief sought by the appellant would require a partial unwinding of the transaction that was both approved in the Arrangement and already concluded. The Court of Appeal noted that Section 193(9) of the Act provided powers to the court in determining whether to approve a plan of arrangement and not a similar discretion after an arrangement transaction has been concluded. Their refusal to provide any relief was also impacted by the fact that the Court of Appeal was unable to determine whether the transaction would have been proceeded if the process prior to the Arrangement had been different. Although there was an error in the approval of the Arrangement, the Court of Appeal declined to take authority to unwind a transaction effectively barring the relief sought by the warrant holders.
The decision in Taiga v. Munday highlights the need to consider seeking interim relief whether in the form of stay or otherwise to ensure that it is still possible to secure practical relief from an appeal. The Court of Appeal made express note of this stating:
If the appellants wanted to preserve their 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 warrant holders, having not sought to stay the decision of the chambers judge and having not had their appeal heard until after the transaction defined by the Arrangement was concluded, found that although the Court of Appeal agreed with them that the Arrangement had been wrongly approved, it was unable to offer any relief.