A-840-81
Canadian National Railway Company (Appellant)
v.
Canadian Transport Commission (Respondent)
Court of Appeal, Pratte, Ryan JJ. and Hyde
D.J.—Montreal, April 22 and 23, 1982.
Transportation — In 1975, Canadian National Railway
Company (CN) acquired 18% minority interest in
EuroCanadian Shipholdings Limited (ECSL), holding com
pany controlling number of transportation companies, after
notifying Canadian Transport Commission pursuant to s. 27 of
National Transportation Act — S. 27(1) requires notice of
proposed acquisition of interest in business or undertaking of
person whose principal business is transportation — In July
and November 1980, CN acquired preferred shares of ECSL,
but did not notify Commission of acquisitions — Commission
held that s. 27 applied to such acquisitions and ordered CN to
give required notice — S. 27 applies to all proposed acquisi
tions and does not distinguish between first-time purchaser of
shares, and person who, being already shareholder, increases
holdings in same company — Within meaning of s. 27, acqui
sition of shares is indirect way of acquiring interest in business
or undertaking — S. 27(5) presupposes that acquisition of
interest in company may be, within meaning of section, means
of acquiring interest in undertaking of company — No distinc
tion between classes of shareholders — Appeal from Commis
sion's decision dismissed — National Transportation Act,
R.S.C. 1970, c. N-17, ss. 27, 64.
CASE JUDICIALLY CONSIDERED
CONSIDERED:
Roche v. Marston, [1951] S.C.R. 494.
APPEAL.
COUNSEL:
Serge A. Cantin for appellant.
G. W. Nadeau, Q. C. for respondent.
Ben Bierbrier for intervenor Deputy Attorney
General of Canada.
Gregory Evans and William Sutherland for
intervenor Province of Nova Scotia.
SOLICITORS:
Canadian National Railways Law Depart
ment, Montreal, for appellant.
Canadian Transport Commission Legal Ser
vices, Hull, for respondent.
Deputy Attorney General of Canada for inter-
venor Deputy Attorney General of Canada.
Attorney General of Nova Scotia, Halifax,
for intervenor Province of Nova Scotia.
The following are the reasons for judgment
delivered orally in English by
PRATTE J.: This is an appeal under section 64 of
the National Transportation Act, R.S.C. 1970, c.
N-17, from a decision of the Canadian Transport
Commission relating to the acquisition by
Canadian National Railway Company, in July and
November 1980, of preferred shares of Euro-
Canadian Shipholdings Limited, a holding and
investment company incorporated under the laws
of Bermuda.
It is necessary, first, to recall that, in 1975,
Canadian National Railway Company acquired an
18% minority interest in the issued shares of
EuroCanadian Shipholdings Limited. Before pro
ceeding to that acquisition, it gave notice to the
Canadian Transport Commission pursuant to sub
section 27(1) of the National Transportation Act.'
Indeed, it was considered, and quite rightly, that,
as EuroCanadian Shipholdings Limited was a
holding company controlling a number of trans
portation companies, the acquisition of shares in
that company by Canadian National was, in
effect, within the meaning of subsection 27(1), the
acquisition of "an interest ... in the business or
undertaking of [a] person whose principal business
' Section 27 reads as follows:
27. (1) A railway company, commodity pipeline company,
company engaged in water transportation, or person operat
ing a motor vehicle undertaking or an air carrier, to which
the legislative jurisdiction of the Parliament of Canada
extends, that proposes to acquire, directly or indirectly, an
interest, by purchase, lease, merger, consolidation or other
wise, in the business or undertaking of any person whose
principal business is transportation, whether or not such
business or undertaking is subject to the jurisdiction of
Parliament, shall give notice of the proposed acquisition to
the Commission.
(2) The Commission shall give or cause to be given such
public or other notice of any proposed acquisition referred to
in subsection (I) as to it appears to be reasonable in the
[was] transportation". The Commission thereafter
gave public notice of that proposed acquisition
pursuant to subsection 27(2) and, after receiving
various objections, conducted an investigation in
the course of which Canadian National gave the
assurance that it did not propose to acquire more
than an 18% minority interest in the capital stock
of EuroCanadian Shipholdings Limited. Following
that investigation, the Commission decided not to
disallow the proposed acquisition.
In 1980, Canadian National, without giving any
notice to the Commission, acquired preferred
shares in the same company:
(a) In July 1980, Canadian National acquired
5,400 non-voting 12 1 / 2 % redeemable cumulative
preference shares, of the par value of (U.S.)
$1,000 each, redeemable not later than July 22,
1983;
(b) In November 1980, it acquired 2,970. non
voting 12 1 / 2 % redeemable second preference
shares, of the par value of (U.S.) $1,000 each,
redeemable not later than November 10, 1985;
circumstances, including notice to the Director of Investiga
tion and Research under the Combines Investigation Act.
(3) Any person affected by a proposed acquisition referred
to in subsection (1) or any association or other body repre
senting carriers or transportation undertakings affected by
such acquisition may, within such time as may be prescribed
by the Commission, object to the Commission against such
acquisition on the grounds that it will unduly restrict compe
tition or otherwise be prejudicial to the public interest.
(4) Where objection is made pursuant to subsection (3),
the Commission
(a) shall make such investigation, including the holding of
public hearings, as in its opinion is necessary or desirable
in the public interest;
(b) may disallow any such acquisition if in the opinion of
the Commission such acquisition will unduly restrict com
petition or otherwise be prejudicial to the public interest;
and any such acquisition, to which objection is made within
the time limited therefor by the Commission that is disal
lowed by the Commission, is void.
(5) Nothing in this section shall be construed to authorize
any acquisition of an interest in any other company that is
prohibited by any Act of the Parliament of Canada.
(c) In November 1980, it also acquired 33,500
non-voting 71% convertible participating
redeemable cumulative second preference
shares, of the par value of (U.S.) $1,000 each,
redeemable not later than November 10, 1985.
Canadian National did not notify the Commission
of those acquisitions because it considered that
they were not acquisitions of the kind referred to
in subsection 27(1). By the decision under attack,
the Commission has held that those acquisitions
were acquisitions to which section 27 applied; it
therefore ordered Canadian National to "give
notice as required by that Section forthwith".
The only issue on this appeal is whether the
acquisitions by Canadian National, in July and
November 1980, of preference shares of
EuroCanadian Shipholdings Limited were acquisi
tions to which section 27 of the National Trans
portation Act applied. The appellant does not chal
lenge in any other respect the legality of the
decision of the Commission.
In support of its contention that section 27 does
not apply to those acquisitions of preferred shares,
counsel for the appellant first argued that, while
section 27 applies to the first and initial transac
tion whereby a carrier acquires an interest in the
transportation business of another person, it does
not apply to transactions whereby a carrier who
already has an interest in the transportation busi
ness of another person increases that interest. As
Canadian National already had, since 1975, an
interest in the transportation undertaking or busi
ness of EuroCanadian Shipholdings Limited, it
could, according to counsel, increase its holdings in
that company without being subject to the control
provided for in section 27. In other words, counsel
interprets subsection 27(1) as if it applied only to
carriers who propose to become interested in the
transportation business of another person. How
ever, this is not what the subsection says. Accord
ing to its text, the subsection applies whenever a
carrier "proposes to acquire ... an interest" in the
transportation undertaking of another person. If it
is assumed, as it must be for the purposes of this
argument, that the acquisition of shares in a com
pany involves the acquisition of an interest in the
business or undertaking of that company, the
wording of the section does not allow any distinc
tion to be made between the person who purchases
shares in a company for the first time and the one
who, being already a shareholder, increases his
holdings in the same company; both acquire, by
their purchases, an interest in the company and its
business. This is, in my view, the natural and
normal meaning of the words used in subsection
27(1). Counsel for the appellant has been unable
to suggest any cogent reason for adopting the
restrictive and, in my view, less natural interpreta
tion that he proposed. I would, therefore, reject
that first submission.
The appellant's second submission is that sub
section 27(1) did not apply to the acquisitions of
the preferred shares here in question because those
acquisitions did not involve the acquisition of an
interest in the transportation undertaking of
EuroCanadian Shipholdings Limited. Counsel first
said that the mere acquisition of shares in a com
pany cannot, in itself, be considered as the acquisi
tion of an interest in the undertaking or business of
that company. In support of that proposition, he
referred to the decision of the Supreme Court of
Canada in Roche v. Marston, [1951] S.C.R. 494.
He added that there is only one case in which the
acquisition of shares in a company involves the
acquisition of an interest in the undertaking or
business of the company: that is when the acquisi
tion of the shares gives the shareholder managerial
rights with respect to the business or undertaking
of the company. The shareholder who does not
enjoy managerial rights, said he, must be
assimilated to a bondholder who, admittedly, has
no interest in the undertaking or the business of
the company.
As was decided by the Supreme Court in Roche
v. Marston, there is a clear distinction in law
between the acquisition of an interest in a com
pany and the acquisition of an interest in the
undertaking of that company. However, it is also
clear, in my view, that, within the meaning of
section 27, the acquisition of shares in a company
is an indirect way of acquiring an interest in the
business or undertaking of that company. Any
doubt that I could have on that point is dissipated
by subsection 27(5) which, as I read it, clearly
presupposes that the acquisition of an interest in a
company may be, within the meaning of the sec
tion, a means of acquiring an interest in the under
taking of that company. I cannot, in this regard,
make any distinction between the various classes
of shareholders. All shareholders, be they common
or preferred, have, in my view, an interest in the
company and, indirectly, in its undertaking and
business. I simply do not understand, and for that
reason can neither accept nor reject, counsel's
submission that the shareholders' interest in the
business of the company flows from their
managerial rights.
For those reasons, I would dismiss the appeal.
RYAN J. concurred.
HYDE D.J. concurred.
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