Introduction

A dispute over the registration of similar corporate names became “one of those rare cases” where a reasonable apprehension of bias was established, according to a recent decision of the Nova Scotia Supreme Court.

In Africentric Learning v Registry of Joint Stocks, 2014 NSSC 319, the applicant Africentric Learning Institute of Nova Scotia (“ALI”) sought judicial review of a decision of the Registrar of Joint Stock Companies. In her June 2013 decision, the Registrar refused to direct another company to change its name or even to open a name dispute file, despite knowing that the two organizations were in disagreement over using “ALI” as part of their corporate names. Justice LeBlanc quashed the Registrar’s decision, finding that it gave rise to a reasonable apprehension of bias and was also unreasonable.

Legal & factual background

Section 16(1)(a) of the Nova Scotia Companies Act, RSNS 1989, c 81 had never been judicially considered[1] but ended up at the centre of this case. This provision states: “No company shall be registered under a name identical with that of any other subsisting company, incorporated or unincorporated, or so nearly resembling the same as to be calculated to deceive” – unless the “subsisting company” consents.

ALI was the “subsisting company” here. It was incorporated in 2008. The current dispute began in 2012, when an employee with the provincial Department of Education requested that the Registry change ALI’s name to the “Delmore Buddy Daye Africentric Learning Institute Inc” (“DBDALI”).

The employee was not an officer or director of ALI,[2] but he was apparently indirectly connected to the name dispute. Justice LeBlanc noted that many in the Department of Education thought the name of ALI should incorporate Mr Daye’s name, and “[i]n the summer of 2012 the Minister of Education indicated that her department would not fund ALI unless it bore Mr. Daye’s name.”[3]

When the Registrar rejected the employee’s request to change the name, the new board of directors of DBDALI instead decided to incorporate a new entity and pursue registration of the name.[4]

Evidence of internal communications revealed that Registry employees were concerned about the similarity between the names, and the Registry eventually sent a letter to the Education employee saying that the request was rejected. (Justice LeBlanc accepted that this was a decision of the Registrar even though she did not personally send the letter.)[5]

However, the Education employee pursued the matter with the Registrar personally, and she agreed to meet with him. Justice LeBlanc found that although “it was not normally her practice to meet with clients regarding a name change request, she was prepared to make an exception”[6] – in the words of the Registrar’s email to the employee, she was “prepared to do so given what I understand to be your department’s connection to this file.”[7]

Moments after the meeting, the Registrar advised staff that she would approve the name change, and she issued a certificate accordingly. Counsel for ALI asked the Registrar to reconsider and direct a name change under section 16 of the Companies Act. The Registrar refused, and it was this decision that sparked ALI’s application for judicial review.[8]

The applicant proved a reasonable apprehension of bias

Justice LeBlanc reviewed the essential questions that must be answered before deciding whether there is a reasonable apprehension of bias:

What would an informed person, viewing the matter realistically and practically—and having thought the matter through—conclude. Would he think that it is more likely than not that [the decision-maker], whether consciously or unconsciously would not decide fairly.[9]

Justice LeBlanc recognized that there is a high threshold required to prove bias, and a “strong” presumption of impartiality on the part of the decision-maker,[10] but nevertheless found that “this is one of those rare cases in which a reasonable apprehension of bias has been established by the applicant.”[11] His key finding was that the Registrar was, or appeared to be, willing to change course and “deviate from her standard practice” in order to meet with the Education employee when she thought the Department of Education was behind the request.[12]

The timing informed the appearance of bias; the Registrar reversed her previous decision on the DBDALI name “minutes after the meeting” with the Education employee. Furthermore:

[48]        The name change was made effective the very next day.  Unlike the protocol followed when ALI incorporated, the Registrar made her decision without consulting ALI or seeking its consent.  The Registrar apparently saw no need to consult ALI despite her knowledge that the two groups were involved in a dispute and that DBDALI…was attempting to “take over” the operations of ALI.

Applying the test set out above, Justice LeBlanc concluded that “an informed person viewing the matter realistically and practically and having thought the matter through, would think it more likely than not that the Registrar, consciously or unconsciously, would not decide ALI’s request fairly.”[13] In particular, the reasonable person “would be left with the impression that s. 16 of the Companies Act is applied differently by the Registry to private companies that are closely aligned with government departments than to those without such associations.”[14]

It should be mentioned that this case involved some preliminary procedural wrangling over the record, which ALI maintained was incomplete.[15] In particular, the original record filed by the Registrar contained no reference to:

  1. the original decision of the Registrar rejecting the DBDALI name as being too similar to an existing entity, or
  2. the meeting between the Registrar and the Department of Education employee.[16]

DBDALI eventually produced the further relevant documents, and the Court issued a consent order permitting ALI to file them “as evidence outside the record.”[17]

ALI argued before Justice LeBlanc that the timing and content of the Registrar’s disclosure also revealed a reasonable apprehension of bias. However, given his finding on the Registrar’s conduct and decision on the name change, it was not necessary for Justice LeBlanc to consider whether the disclosure issues themselves gave rise to a reasonable apprehension of bias.

In any event, the decision was unreasonable

Justice LeBlanc went on to consider whether the Registrar’s decision was reasonable, in case he erred in his conclusion on bias.[18] On the reasonableness standard of review, the issue was whether the Registrar’s decision under section 16 of the Companies Act refusing to order DBD to change its name fell “within the range of acceptable outcomes.”[19] It did not, according to Justice LeBlanc, meaning the decision was unreasonable and had to be quashed.[20]

Most importantly, the Registrar applied the wrong legal test, and misinterpreted the meaning of “calculated to deceive” in section 16.[21] In brief, [22] Justice LeBlanc said the real issue was whether “one company will be confused with the other” such that the impugned name was “likely to deceive,” and found that the Registrar could only make that determination upon consideration of the entire context.[23]

The context in this case, from the conflict between the two organizations over the “ALI” name and the attempted “takeover” of ALI “because ALI would not consent to a name change,” to the simple fact that “both companies [were] purporting to provide the same services to the same community,”[24] suggested that confusion would likely occur.

But the Registrar did not apply a contextual test, or provide any authority for her interpretation of “calculated to deceive” as being a “stringent” standard that ALI had not met.[25] Instead, she “limited her analysis to a purely textual comparison of the names”; for example, her letter to ALI refusing to direct DBDALI to change its name pointed out that each corporate name had six words, and only three were the same.[26] Justice LeBlanc noted that, contrary to the case law, the Registrar’s standard “apparently require[d] a greater than 50% tally of identical words in the business names, and evidence of actual deception.”[27]

Justice LeBlanc concluded: “The analysis conducted by the Registrar is superficial and unreasonable” – she had not considered any contextual factors at all, let alone the ones identified in the case law:[28]

[83]        If the Registrar had considered these contextual factors when performing the textual analysis to determine whether there was a probability of deception, the only reasonable conclusion would have been that there was.  Having failed to apply the correct test and consider the appropriate contextual factors, the Registrar’s decision must be quashed as unreasonable.

Remedy

Nova Scotia Civil Procedure Rule 7.11(c) provides that:

The court may grant any order in the court’s jurisdiction that will give effect to a decision on a judicial review, including any of the following orders:

  1. an injunction preventing a respondent from doing anything, or requiring a respondent to do anything;

Under the authority of this Rule, Justice LeBlanc ordered the Registrar “to direct DBDALI to change its name.” There were two reasons why he decided not to remit the matter to the Registrar: (1) Because of the reasonable apprehension of bias finding, the Registrar was “no longer fit to act” and (2) in any event, “returning the case to the decision-maker would be pointless, because only one interpretation or solution is possible when the proper test is applied.”[29]

Conclusion

This case demonstrates that there can be a lot at stake when a company chooses and then seeks to register its name. The company wants to get its purpose across, and also set itself apart from other organizations in its field. A registrar must act impartially and reasonably when evaluating registration requests and cannot let personal or intergovernmental connections get in the way of fair decisions.