R. v. Black & Decker Manufacturing Co., [1975] 1 SCR 411

Supreme Court of Canada

R. v. Black & Decker Manufacturing Co., [1975] 1 S.C.R. 411

Date: 1974-02-12

Her Majesty The Queen (Plaintiff) Appellant;

and

Black and Decker Manufacturing Company, Limited (Defendant) Respondent.

1973: November 28, 29; 1974: February 12.

Present: Fauteux C.J. and Abbott, Martland, Judson, Ritchie, Spence, Pigeon, Laskin and Dickson JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.

Corporations—Amalgamation—Continuance of amalgamating corporations as a corporate entity—Responsibility of amalgamated corporation for criminal acts of amalgamating corporations—Combines Investigation Act, R.S.C. 1970, c. C-23—Canada Corporations Act, R.S.C. 1970, c. C-32, s. 137 .

Criminal law—Amalgamation of corporations—Liability of amalgamating companies to prosecution after amalgamation—Responsibility of amalgamated corporation.

By an agreement dated January 15, 1971 Black and Decker Manufacturing Company, Limited, DeWalt Canada Limited and Master Pneumatic Tools (Canada), Ltd. agreed to amalgamate under the name of Black and Decker Manufacturing Company, Limited and on the same date letters patent were issued confirming the amalgamation agreement. On April 5, 1972 an information was sworn charging Black and Decker Manufacturing Company, Limited with two counts of retail price maintenance contrary to the Combines Investigation Act. The offences were alleged to have occurred between October 1966 and August 1970. The accused moved to quash the information or for dismissal on the grounds that no criminal responsibility could be transferred to it with respect to a period prior to the amalgamation. In the Court of Appeal the appellant succeeded in obtaining an Order of Prohibition prohibiting further proceedings on the information; that order is appealed to this Court.

Held: The appeal should be allowed.

Upon an amalgamation under the Canada Corporations Act,  R.S.C. 1970, c. C-32 , no “new” company is created and no “old” company is extinguished. According to the Act the amalgamating companies

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are “amalgamated and continue as one company”. One of the effects of this is that amalgamating corporations in their new identity as the amalgamated corporation, remain liable to prosecution for offences committed prior to the amalgamation.

Stanward Corporation v. Denison Mines Ltd., [1966] 2 O.R. 585 approved; Re Quieting Titles Act (1962), 40 W.W.R. 182 and R. v. Beamish Construction Co Ltd., [1966] 2 O.R. 867 disapproved; R. v. Howard Smith Paper Mills Ltd., [1954] 4 D.L.R. 161 referred to.

APPEAL from a judgment of the Court of Appeal for Ontario[1] allowing an appeal from an Order of Fraser J. and making an Order of Prohibition. Appeal allowed.

D.Q. Patterson and J.G.C. Duppereault, for the appellant.

J.M. Roland and J.G. Kennish, for the respondent.

The judgment of the Court was delivered by

DICKSON J.—Black and Decker Manufacturing Company, Limited was incorporated under the Companies Act of Canada, R.S.C. 1906, c. 79, by Letters Patent dated April 15, 1922. By an agreement dated January 25, 1971, the Company agreed to amalgamate with DeWalt Canada Limited and Master Pneumatic Tools (Canada), Ltd. pursuant to what was then s. 128A  of the Canada Corporations Act  (now s. 137  of R.S.C. 1970, c. C-32 ) under the name of Black and Decker Manufacturing Company, Limited and on the same date Letters Patent were issued confirming the amalgamation agreement. A year or so later, on April 5, 1972 an information was sworn charging Black and Decker Manufacturing Company, Limited with two retail price maintenance offences, contrary to the Combines Investigation Act. The first offence was alleged to have occurred at the Municipality of Metropolitan Toronto and elsewhere in Canada between October of 1966 and August of 1970, and the second offence at the Municipality of Metropolitan Toronto and else-

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where in Ontario in the month of August 1970. On arraignment but prior to entering a plea, the accused moved for an order quashing the information or alternatively directing an acquittal on the ground that the charges being with respect to a period prior to the amalgamation, no criminal responsibility “can be transferred to” the amalgamated company. The Provincial Court Judge dismissed the motion. The accused then moved for an order of prohibition before Fraser J. of the Supreme Court of Ontario who was of the opinion that the point raised went to the merits of the case rather than to jurisdiction and should preferably be disposed of at trial. The Court of Appeal for Ontario allowed an appeal from the order of Fraser J. and made an order prohibiting any judge of the Provincial Court (Criminal Division) of the Judicial District of York from taking any further proceedings against Black and Decker Manufacturing Company, Limited upon the information dated April 5,1972.

It will be convenient to quote the relevant parts of s. 137  of the Canada  Corporations Act , supra:

137. (1) Any two or more companies to which this Part applies may amalgamate and continue as one company.

(2) Companies proposing to amalgamate may enter into an agreement for the amalgamation prescribing its terms and conditions and the mode of carrying the amalgamation into effect.

(3) The amalgamation agreement shall further set out

(a) the name of the amalgamated company;

(b) the objects of the amalgamated company;

(c) the amount of its authorized capital, the division thereof into shares and the rights, restrictions, conditions or limitations attaching to any class of shares;

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(d) the place within Canada at which the head office of the amalgamated company is to be situated;

(e) the names, callings and postal addresses of the first directors thereof;

(f) when the subsequent directors are to be elected;

(g) whether or not the by-laws of the amalgamated company are to be those of one of the amalgamating companies and, if not, a copy of the proposed by-laws; and

(h) such other details as may be necessary to perfect the amalgamation and to provide for the subsequent management and working of the amalgamated company and the manner of converting the authorized and issued capital of each of the companies into that of the amalgamated company as determined pursuant to paragraph (c) above.

…

(10) The amalgamating companies shall, within six months of the date of the final vote on the amalgamation agreement, jointly file with the Minister the amalgamation agreement together with a certificate from the secretary of each of the amalgamating companies establishing the percentage of those who voted in favour of the agreement and the percentage of dissentient shareholders, in respect of each class of shares.

(11) Not less than eight days following the final vote on the amalgamation agreement and upon receipt of evidence that no application was made under this section for the annulment of the amalgamation agreement or that, if such an application was made, it was dismissed, the Minister may issue letters patent confirming the agreement: but the requirement of eight days delay may be dispensed with if the amalgamation agreement has received the approval of more than ninety per cent of the votes of each class of shares cast at each meeting of the amalgamating companies.

…

(13) Upon the issue of letters patent pursuant to subsection (11), the amalgamation agreement has full force and effect and

(a) the amalgamating companies are amalgamated and are continued as one company (in this section called the “amalgamated company”) under the name and having the authorized capital and objects specified in the amalgamation agreement; and

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(b) the amalgamated company possesses all the property, rights, assets, privileges and franchises, and is subject to all the contracts, liabilities, debts and obligations of each of the amalgamating companies.

(14) All rights of creditors against the property, rights, assets, privileges and franchises of a company amalgamated under this section and all liens upon its property, rights, assets, privileges and franchises are unimpaired by the amalgamation, and all debts, contracts, liabilities and duties of the company thenceforth attach to the amalgamated company and may be enforced against it. 1964-65, c. 52, s. 41; 1967-68, c. 9, s. 8.

Arnup J.A. who delivered the unanimous judgment of a Court, comprising Gale C.J.O., Jessup and Arnup JJ.A., after quoting s. 137, said:

Puzzling questions of great difficulty are raised by this section and particularly from the expressions “continue as one company” (s. 137(1)), “the amalgamating companies are amalgamated and are continued as one company” (s.s.(13)(a)), and the use of the word “possesses” in relation to rights and assets (s.s.(13)(b)), rather than any words indicating a “transfer”. Finally, and in the end this case will turn upon the meaning of this provision, what is meant by the language of s.s. (14) that all liabilities (of the old company) “thenceforth attach to the amalgamated company and may be enforced against it”?

then reviewed the authorities, and concluded:

We are therefore not concerned with whether the old company has disappeared as a separate and distinct entity. What concerns us is whether the new company can be prosecuted for the sins of the old one. The case narrows down in the end to the question whether subsection (13)(b) of s. 137, in making the new company “subject to all the liabilities” of each of the old companies, imposes upon the new company criminal liability of one of the old companies. The word “liabilities” appears not only in clause (b) of s.s. (13) but also in s.s. (14). Leaving aside the rather curious fact that in clause (b) the matters to

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which the new company is subject are listed as “all the contracts, liabilities, debts and obligations”, whereas s.s. (14) lists these matters as “all debts, contracts, liabilities and duties”, of more significance is the French version of the statute. The words used in clause (b) as the French equivalent of “liabilities” is “engagements”, and the equivalent of “liabilities” in s.s. (14) is given in French as “passifs”. My brother Jessup, whose knowledge and grasp of the French language is much greater than mine, has pointed out to me that both “engagements” and “passifs” are commercial synonyms for the English word “liabilities”. In his view, if a connotation of criminal liability had been intended the French synonym would have been the word “responsabilités”. (For an example, see R.S.C. 1970, 1st. Supp., chap. 19, s. 4.5(6), amending the Canadian and British Insurance Companies Act).

Furthermore, it seems clear to me from the argument of the Crown that we are being asked to imply a penal sanction upon the new company that has not been spelled out in express terms by Parliament. In my view, we ought not to make any such implication. It is still the law that penal sanctions are to be imposed by express language. “Liabilities”, without more, cannot in my view be interpreted to include “criminal liabilities”, or more accurately, “criminal responsibilities”.

This conclusion is sufficient to dispose of this case. The new company could not be prosecuted for acts committed by the old company. Since the new company was not even in existence during the period covered by the dates in the charge, it cannot possibly be found guilty unless it is liable for acts or omissions of the old company.

The Court of Appeal concluded as a matter of construction of the language of s. 137  of the Canada Corporations Act  that “liabilities” as used in subss. (13)(b) and (14) could not be interpreted to include criminal liabilities, but in reaching that conclusion it would seem that the Court accepted, as a first step, the proposition that the “new” company, i.e. the amalgamated company, is a different, separate and distinct company from the “old” companies, i.e. the

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amalgamating companies. Whether an amalgamation creates or extinguishes a corporate entity will, of course, depend upon the terms of the applicable statute, but as I read the Act, in particular s. 137, and consider the purposes which an amalgamation is intended to serve, it would appear to me that upon an amalgamation under the Canada Corporations Act  no “new” company is created and no “old” company is extinguished. The Canada Corporations Act  does not in terms so state and the following considerations in my view serve to negate any such inference: (i) palpably the controlling word in s. 137 is “continue”. That word means “to remain in existence or in its present condition”—Shorter Oxford English Dictionary. The companies “are amalgamated and are continued as one company” which is the very antithesis of the notion that the amalgamating companies are extinguished or that they continue in a truncated state; (ii) the statement in s. 137(13) (b) that the “amalgamated company possesses all the property, rights...” If corporate birth or death were envisaged, one would have expected to find, in the statute, some provision for transfer or conveyance or transmission of assets and not simply the word “possesses”, a word which re-enforces the concept of continuance; (iii) letters patent of amalgamation are obtained for the purpose of “confirming the agreement” (s. 137(11) ), in marked contrast to letters patent of incorporation which expressly create a body corporate and politic; (iv) the French version of s. 137(1) , perhaps better than the English version, serves to express what has occurred, “Deux ou plus de deux compagnies…peuvent fusionner et continuer comme une seule et même compagnie”. The effect is that of blending and continuance as one and the selfsame company; (v) the Act contains a number of express provisions whereby the life of corporate creations may be terminated—Videlicet where a company carries on business not within the scope of its objects (s. 5(4) ), or forfeits its charter (s. 31 ), or surrenders its charter (s. 32 ), or is dissolved (s. 133(11) ). The Act is silent on the extinction of companies by amalgamation; (vi) if Parliament had intended that a company

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by the simple expedient of amalgamating with another company could free itself of accountability for acts in contravention of the Criminal Code or the Combines Investigation Act or the Income Tax Act, I cannot but think that other and clearer language than that now found in the Canada Corporations Act  would be necessary.

In Re Quieting Titles Act[2], Verchère J. held that by letters patent of incorporation under The Corporations Act, R.S.O. 1960, c. 71, the “... existing undertakings were blended into one, and each amalgamating company lost its previous separate identity...” and “…the amalgamating company has now ceased to exist.” It is true that upon amalgamation each constituent company loses its “separate” existence but it by no means follows that it has thereby ceased to exist. Then, in Regina v. J.J. Beamish Construction Co. Ltd.[3], Jessup J., as he then was, stated, at p. 872:

I reached the conclusion of Verchère, J. that the amalgamated company, in whose entity the amalgamating companies continue under s. 96(4), is a separate entity and that the amalgamating companies cease to have entity or identity once amalgamation is accomplished.

On the same date, July 4, 1966, that Jessup J. delivered his reserved judgment in Beamish, Kelly J.A. delivered a reserved judgment of the Court of Appeal for Ontario in Stanward Corporation v. Denison Mines Ltd.[4], the Court consisting of Kelly, Wells and Laskin JJ.A., in which Kelly J.A. said, at p. 592:

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What we have here is an amalgamated company into which, simultaneously, two amalgamating companies have fused along with their assets and liabilities. Under this fusion, and by virtue of its statutory implementation, it may be said, broadly, that the amalgamated company acquired the assets and assumed the liabilities of the two component companies;…

and later, on the same page:

Returning to the view that the amalgamated companies do not form a new company but continue to subsist as one, the conclusion that there is no acquisition is, if anything, more apparent. The language of s. 96 is in my opinion unambiguous in providing that the two amalgamating companies shall continue as one company. While it may be difficult to comprehend the exact metamorphosis which takes place, it is within the Legislature’s competence to provide that what were hitherto two shall continue as one.

Kelly J.A. compared the language of s. 96 of Ontario Statutes 1953, c. 19, upon which the Stanward case was decided, and that of its predecessor, s. 11 of The Companies Act, R.S.O. 1950, c. 59, upon which Regina v. Howard Smith Paper Mills, Ltd.[5], a judgment of my brother Spence, was decided. The earlier legislation referred to the amalgamated corporation as the “new corporation” and spoke of “the corporation so incorporated”. The language expressed a clear intention to substitute a new corporation in the place and stead of the amalgamating corporations. By the time the Stanward case fell to be decided, however, the Legislature had re-enacted the section in words which, in the opinion of Kelly J.A., with which I agree, indicated an intention to change the effect of amalgamation. With respect, I am of the view that the observations of Kelly J.A. in Stanward, although perhaps obiter, are sound in law and correctly reflect the consequences of an amalgamation pursuant to the language found in s. 96 of Ontario 1953, c. 19, or pursuant to the

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substantially similar language found in s. 137  of the Canada  Corporations Act .

The word “amalgamation” is not a legal term and is not susceptible of exact definition: In re South African Supply and Cold Storage Company[6]. The word is derived from mercantile usage and denotes, one might say, a legal means of achieving an economic end. The juridical nature of an amalgamation need not be determined by juridical criteria alone, to the exclusion of consideration of the purposes of amalgamation. Provision is made under the Canada Corporations Act  and under the Acts of the various provinces whereby two or more companies incorporated under the governing Act may amalgamate and form one corporation. The purpose is economic: to build, to consolidate, perhaps to diversify, existing businesses; so that through union there will be enhanced strength. It is a joining of forces and resources in order to perform better in the economic field. If that be so, it would surely be paradoxical if that process were to involve death by suicide or the mysterious disappearance of those who sought security, strength and, above all, survival in that union. Also, one must recall that the amalgamating companies physically continue to exist in the sense that offices, warehouses, factories, corporate records and correspondence and documents are still there, and business goes on. In a physical sense an amalgamating business or company does not disappear although it may become part of a greater enterprise.

There are various ways in which companies can be put together. The assets of one or more existing companies may be sold to another existing company or to a company newly‑incorporated, in exchange for cash or shares or other consideration. The consideration received may

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then be distributed to the shareholders of the companies whose assets have been sold, and these companies wound up and their charters surrendered. In this type of transaction a new company may be incorporated or an old company may be wound up but the legal position is clear. There is no fusion of corporate entities. Another form of merger occurs when an existing company or a newly-incorporated company acquires the shares of one or more existing companies which latter companies may then be retained as subsidiaries or wound up after their assets have been passed up to the parent company. Again there is no fusion. But in an amalgamation a different result is sought and different legal mechanics are adopted, usually for the express purpose of ensuring the continued existence of the constituent companies. The motivating factor may be the Income Tax Act or difficulties likely to arise in conveying assets if the merger were by asset or share purchase. But whatever the motive, the end result is to coalesce to create a homogeneous whole. The analogies of a river formed by the confluence of two streams, or the creation of a single rope through the intertwining of strands have been suggested by others.

Counsel for the accused argued that an amalgamation agreement provides for so many changes (s. 137(3)) and the transformation of the amalgamating companies is so complete as to amount to extinction of life. I do not agree. A company can, by supplementary Letters Patent, make equally drastic changes without affecting, in the slightest, corporate longevity.

It was also submitted that if the amalgamating companies continue in amalgamation, in all their plenitude, then ss. 137(13)(b) and 137(14) are mere surplusage. I would not so regard them. These sections spell out in broad language amplification of a general principle, a not

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uncommon practice of legislative draftsmen. If ss. 137(13)(b) and 137(14) are to be read, however, as other than merely supportive of a general principle and other than all-embracing, then some corporate incidents, such as criminal responsibility, must be regarded as severed from the amalgamating companies and outside the amalgamated company. What happens to these vestigial remnants? Are they extinguished and if so, by what authority? Do they continue in a state of ethereal suspension? Such metaphysical abstractions are not, in my view, a necessary concomitant of the legislation. The effect of the statute, on a proper construction, is to have the amalgamating companies continue without subtraction in the amalgamated company, with all their strengths and their weaknesses, their perfections and imperfections, and their sins, if sinners they be. Letters patent of amalgamation do not give absolution.

I would allow the appeal, set aside the judgment of the Court of Appeal for Ontario, quash the Order of Prohibition granted to the respondent by the Court of Appeal and return the case to the Ontario Provincial Court (Criminal Division) of the Judicial District of York for disposition in accordance with these reasons.

Appeal allowed.

Solicitor for the appellant: Attorney General of Canada, Ottawa.

Solicitor for the respondent: Osler, Hoskin & Harcourt, Toronto.