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The Gazette, Thursday, June 26, 2008

The rapidity with which the Supreme Court heard the Bell buyout case, and the unprecedented speed with which it overturned the Quebec Court of Appeal's ruling that would have derailed the deal, sends an unmistakeable message to the appeal bench to get its act together on commercial law.

The Supremes' unanimous 7-0 decision, with costs thrown in as well, is a stinging rebuke to the Quebec court, which had ruled in a unanimous 5-0 judgment last month that bondholders, as stakeholders, deserved the same consideration as shareholders in the Ontario Teachers' Pension Fund's $52-billion bid to take BCE Inc., private in the biggest leveraged buyout in world history.

It's not the first time the Supremes have overturned the top Quebec court, but the magnitude of the Bell case, and the consequences of it, dramatize the message from on high. In fact, the Supreme Court has previously reversed seven out of nine commercial rulings from the Quebec court, including five out of five unanimous judgments, in the last five years.

From 0 for 5 to 0 for 6, for a batting average of .000. These are not great numbers in any World Series. But for serious court watchers, the intent of the Supremes, if not the outcome, was evident in the swift manner in which they expedited the Bell case on their calendar, so it could be heard before the deal closed on June 30. The deal would have cratered as a result of the stunning Quebec Court of Appeal ruling, which essentially aimed to rewrite Canadian business law in a way that would have made it legally impossible to sell a publicly listed company without placating other stakeholders as well as maximizing value for shareholders - the first tenet of corporate governance.

Following the Quebec court decision on May 21, the Supremes granted leave to appeal by May 28, called for written factums by June 6 and oral arguments on June 17. This extended timeline was set out in the high court's initial response on May 26.

Then consider what happened last week.The court heard arguments on Tuesday. It decided the case on Wednesday. It put out a notice of its decision on Thursday. It released the judgment, while reserving its reasons, in a single paragraph at the close of markets on Friday.

A unanimous judgment of the Quebec court was unanimously reversed within 72 hours of a hearing. You don't see that every day. The message to the Quebec court was a resounding rejection of its logic and interpretation of business law, with a slap upside the head - don't you guys understand the consequences of this?

In awarding costs of at least $10 million, all the way back to the Superior Court, to Bell, Teachers and other principals, the Supremes sent a message to the bondholders - stop bringing frivolous cases, or pay the price at the end of the day.

And in putting out its ruling last Friday, a full 10 days before the deal is due to close, the Supremes were telling Bell, Teachers and the investment banks: If this deal craters it won't be because of the Supreme Court. And there is no doubt that had the decision gone the other way, it would have killed the $42.75-per-share deal for BCE's 615,000 individual and institutional shareholders of Canada's most widely held company.

Amid relief and jubilation last Friday, one Bell source acknowledged a loss in the high court "would have been hugely problematic."

While the case was argued by Bell's lead counsel, Guy DuPont of Davies Ward, the hero of the piece on the inside was Pierre Bienvenu of Ogilvy Renault, who was brought in to write Bell's 40-page factum. Arguments to the high court are mostly for show, factums are where cases are really won. And while Bienvenu held the pen, it was Bell CEO Michael Sabia who personally edited every draft.

Today, Bienvenu and Sabia are the $52-billion men. Meanwhile, the Quebec Court of Appeal is left with its reputation as a commercial court in tatters. It is a strong court on Charter cases and the division of constitutional powers, but a very weak one on business law.

Which leaves a huge question for all us all to consider: How are we supposed to build a world- class business culture in Quebec when the highest court in the province doesn't know anything about business?

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