 |
| Sara Blake |
The court articulates important principles of statutory interpretation that are applicable to all statutes. Specifically, the court explains how to interpret common words used in a statute without a statutory definition. The statutory words at issue include “material change.” The statute defines “material” but not “change.” Other undefined common words at issue are “business, operations or capital.”
There is a tendency to mischaracterize undefined common words as ambiguous, but they are not. As the court said, “The Ontario legislature intentionally left these terms undefined to allow the legislation to be applied flexibly and contextually to a wide range of industries and corporate structures.”
So, how should one approach the interpretive exercise when faced with undefined common words?
All words take their meaning from their context — in this case, it is the statutory context that matters.
wassam siddique: ISTOCKPHOTO.COM
Then review the provision in the context of the Act as a whole. The Securities Act contains other provisions requiring disclosure by public companies. Why is disclosure so important — the mischief? The answers lead to a purpose of the statute, which is to ensure that investors receive timely and accurate disclosure from public companies relevant to making investment decisions. The common words must be interpreted to accomplish these purposes.
The court recognized that general statutory terms acquire meaning by being applied in concrete factual circumstances. The court said, “By contrast, adopting rigid definitions would ossify the Securities Act and would frustrate the statutory purpose.”
Given that words take their meaning from their statutory context, I always advise against looking at dictionaries because those definitions are often drawn from different and undisclosed contexts. They influence one’s understanding of the word before one has done the statutory analysis to determine the meaning intended by the statute.
To my surprise, the court said it is okay to start with dictionaries but then criticized the motion judge for interpreting “the meaning of a ‘change’ restrictively by relying on a dictionary definition, rather than interpreting the word in context and with recognition that the legislature intentionally left the term undefined for it to acquire meaning by being applied in specific factual circumstances.” As I said, the judge should not have looked at dictionaries.
The court said that often a general word is used, undefined in the statute, to maintain flexibility “to apply to widely varying factual scenarios. A rigid or technical definition … could limit the effectiveness of the legislation across a broad range of industries or corporate structures.” I note that this is why Interpretation Acts require that every statute shall be given such fair, large and liberal interpretation as best ensures the attainment of its objects.
I also caution against reviewing the interpretations done in other cases before doing one’s own statutory analysis, especially when faced with a common word that needs to be interpreted to be applied in a variety of factual circumstances. The other cases differed in their circumstances and in the arguments made by counsel. The court criticized the judge for this: “the motion judge effectively incorporated statements from lower court cases … into the definition of ‘change’ itself, without grounding the interpretation in the purpose of securities legislation to address informational asymmetries between issuers and investors.” I advise that review of other cases should not be done until after doing the statutory analysis oneself in the context of the circumstances at issue — not before. It is difficult to critique interpretations done in other cases without first doing one’s own statutory analysis.
The court repeatedly rejected a strict interpretation approach. The “legislature intentionally left these terms undefined to preserve their ordinary commercial meaning and flexibility as required by specific factual circumstances.”
The court concluded that the inherent flexibility of what can be a “change” suggests that the ordinary meaning of this term should not be constrained by dictionary definitions. I agree — better not to look at dictionaries.
In conclusion, the court said that the interpretation and application of the common statutory terms “is a highly contextual question of mixed fact and law. … There is no bright line test and this determination is not a science, but rather a matter of judgment and common sense applied to the unique circumstances of each case.”
Many statutes use general words without definition in the expectation that they will be interpreted and applied to a wide range of circumstances. This court decision provides guidance on how to approach the interpretive exercise.
The focus of my comments is on the court’s approach to statutory interpretation. I leave it to others to write about the securities law issues.
Sara Blake is the author of Administrative Law in Canada, 7th edition, LexisNexis Canada. Her practice is restricted to clients who exercise statutory and regulatory powers.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the author’s firm, its clients, Law360 Canada, LexisNexis Canada or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
Interested in writing for us? To learn more about how you can add your voice to Law360 Canada contact Analysis Editor Peter Carter at peter.carter@lexisnexis.ca or call 647-776-6740.