OSC Dismisses Applications in Matter of Securities Act and MI Developments

The Ontario Securities Commission released detailed reasons on December 23, 2009, for its order dismissing the applications of Greenlight Capital Inc., Farallon Capital Management, LLC and other Class A shareholders of MI Developments Inc. (MID) seeking to deny MID the use of exemptions under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (MI 61-101) in connection with related party transactions with Magna Entertainment Corp. (MEC).

In its decision, the OSC refused the relief requested by the applicants.

The OSC found that MID complied with the requirements of MI 61-101 in connection with two groups of related party transactions that were at issue. In addition, the OSC found that there was no evidence to suggest that the directors of MID did not, at all times, act appropriately with a view to complying with their fiduciary duties and their responsibilities to all shareholders.

In addition to dealing with the approval requirements for related party transactions and other elements of MI 61-101, the OSC's decision addresses a number of important securities law issues, including (i) the scope of the OSC's jurisdiction in applications made pursuant to section 104 of the Act, and (ii) the scope of the OSC's public interest jurisdiction under section 127 of the Act and, specifically, whether private actors, such as shareholders of public companies, can initiate enforcement proceedings at the OSC in respect of an issuer's past conduct.

Davies Ward Phillips & Vineberg LLP acted as counsel to MID on the applications to the OSC, with a team that comprised Kent Thomson, James Doris, Andrea Burke, Derek Ricci and Shelby Austin (litigation); Edward Hannah, Vincent Mercier, Peter Hong and Jeffrey McKenzie (corporate finance & securities) and Richard Crofts (General Counsel to MID).

Greenlight was represented by McCarthy Tétrault LLP with a team that comprised Thomas Heintzman, QC, René Sorell and Andrew Matheson.

Farallon and certain other MID shareholders were represented by Michael Barrack, Jessica Bookman of ThorntonGroutFinnigan LLP; and Wes Voorheis and Shane Priemer of Voorheis & Co. LLP.

Laura Fric, Emmanuel Pressman and Craig Lockwood of Osler, Hoskin & Harcourt LLP and William Ford (Executive Vice President and General Counsel to MEC) represented MEC, and Peter Howard, Sean Dunphy, Edward Waitzer, Brian Pukier, Ellen Snow and Amanda Linett of Stikeman Elliott LLP represented Fair Enterprise Limited.

OSC staff members appearing on the matter were James (Sasha) Angus, Michelle Vaillancourt, Usman Sheikh, Naizam Kanji, Shannon O'Hearn and Jason Koskela.