Investigations under the Business Corporations Act and their findings: No backtracking, according to the Superior Court
On June 10, 2020, the Quebec Superior Court, under the pen of Justice Nicole Tremblay, rendered judgment in the case of Khalil v. Ressources Robex Inc.,1 in which it was called upon to rule on the investigation process and the inspector’s powers as set out in the Business Corporations Act (hereinafter the “BCA”).2 More specifically, the Court had to rule on a request made by the applicant, Richard Khalil (hereinafter “Khalil”), to ask additional questions of the court-appointed investigator after his investigation report had been submitted.
This decision highlights the importance of anticipating situations in which it may be necessary to ask an inspector additional questions after the inspector has submitted his or her final report.
Facts at issue
The facts at the centre of this case can be summarized as follows. Khalil, acting as representative and proxy of current or former registered holders or beneficiaries of securities of the defendant company Robex Resources Inc. (hereinafter “Robex”), filed an application to appoint an investigator to identify, verify, investigate and document all decisions made by the officers and the board of directors concerning certain parties and all companies with links to those parties, with respect to three (3) distinct sets of circumstances, according to section 421 et seq. of the BCA (hereinafter the “Application for Investigation”).3
On September 24, 2019, Justice Tremblay, who had received the Application for Investigation, ruled in favour of Khalil and ordered an investigation into Robex’s affairs. She appointed Martin Poirier (hereinafter “Poirier”) as the investigator to carry out this mandate, as provided for in section 421 et seq. of the BCA (hereinafter the “Investigation Judgment”).4
In the Investigation Judgment, the Court held that the inspector, Poirier, could only return to the Court under two circumstances: (i) to obtain authorization to exceed his budget, and/or (ii) to obtain directions with respect to any issues or matters pertaining to the investigation or the order itself.5
Following Poirier’s submission of his final investigation report and supporting documents to Khalil and Robex, Khalil sought more precise answers from the inspector regarding some aspects of his report. Accordingly, Khalil petitioned the Superior Court once more to request that Poirier be ordered to answer five (5) additional questions.6 Robex, for its part, considered the inspector’s report to be final and opposed any additional questions aimed at obtaining documentary evidence in support of facts already set out in the report.
Justice Tremblay refused to grant Khalil’s application. In her reasons, she held that the Investigation Judgment had the force of res judicata and therefore, based on the principle of functus officio, she could not issue an additional order to reopen a final judgment of the Superior Court.
According to the Court, an inspector can only exercise the powers conferred on him or her by an order or by statute, neither of which authorized Poirier to answer additional questions that are akin to an application for investigation.7
Khalil’s application was not aimed at correcting an error in the drafting of the Investigation Judgment or in the expression of the decision-maker’s intent, which are the only circumstances that permit the modification of a judgment that has become final. Rather, by his application, Khalil sought to obtain a new order that would effectively amend the Investigation Judgment. This situation was by no means contemplated in the findings of the Investigation Judgment. Consequently, the Superior Court had exhausted its jurisdiction in the matter and could not reopen the case to reconsider its findings or to add new ones.8
In light of the foregoing, the Superior Court dismissed Khalil’s application for permission to ask Poirier additional questions.
This decision serves as a reminder that the approach taken by an applicant for an investigation under the BCA ought to be one of heightened caution. Ultimately, an application that is formulated in an overly restrictive manner and/or that omits certain conclusions at the preliminary stage could prevent an applicant from obtaining clarification of an investigation report in his or her case.
An application for investigation made under section 421 of the BCA should therefore take into account, inter alia, the possibility of a situation that makes it necessary to ask additional questions or to request further investigation by an inspector following the submission of his or her final report, and should include a provision in this regard, if the situation so requires.
1 Khalil v. Ressources Robex Inc, 2020 QCCS 1834 [Ressources Robex].
2 Business Corporations Act, CQLR, c. S-31.1.
3 Ressources Robex, at para. 4.
4 Ressources Robex, at paras. 2-3.
5 Ressources Robex, at para. 6.
6 Ressources Robex, at paras. 9-12.
7 Ressources Robex, at paras. 15-17.
8 Ressources Robex, at paras. 18-23.