74 LEXPERT MAGAZINE
|
JUNE 2017
Edward J. Waitzer is a partner in Stikeman Elliott LLP
in Toronto. His practice focuses on complex business
transactions, acquisitions and restructurings,
as well as public policy and governance matters.
WE LIVE IN A TIME of thin political markets, when governments
appear less capable of tackling long-term systemic policy issues. is
is, in part, because of the short-term incentives that motivate polit-
ical processes. One consequence is that the tension between pub-
lic expectations and legislative/regulatory responsiveness becomes
more severe, and a growing role emerges for our courts to use the
open-ended concept of "reasonable expectations" to create and
modify legal standards and forge new, oen radical legal pathways.
Protecting reasonable expectations is a central organizing prin-
ciple for most legal rules in common law systems. e standard is
applied unevenly, though; private law generally
emphasizes the more subjective aspect of ex-
pectations (i.e., the expectations of particular
stakeholders), while public law tends to focus
on more objective "reasonableness" viewed
from the perspective of society as a whole.
at said, the doctrine has been used to
achieve objectives that are remarkably consist-
ent. e first is to require powerful public and private actors to treat
others fairly. e second is to uphold the integrity of legal regimes
and, through them, social institutions.
Reasonable expectations extend beyond the current law. e Su-
preme Court of Canada described them as looking "beyond legality
to what is fair, given all the interests at play" to address corporate
conduct that is "wrongful even if it is not actually unlawful." Of
late, the doctrine of reasonable expectations has increasingly been
used to extend the scope of legal protections available to stake-
holders, including future generations and
the environment. Rules relating to stand-
ing and intervener status are broadening to
make it easier for environmental and other
groups to challenge harms to stakeholders
caused by powerful actors. Materiality and
related corporate reporting requirements
are broadening in regards to environmental
and other social and systemic issues. e
test for holding parent companies liable for
environmental and human rights harms
caused by their subsidiaries continues to
move away from the fundamental precept
of limited liability embodied in corporate
law statutes, and intergenerational fairness is
being embraced by policymakers. Consider,
for example, the duty of trustees to mediate
between current pension beneficiaries and current (and future) em-
ployees in defined-benefit pension plans.
ere seems little doubt that courts (and regulators) will con-
tinue to use the rubric of reasonable expectations as a basis for deter-
ring and penalizing actions by powerful private actors that tend to
undermine the integrity of the legal regimes and social institutions
on which these actors rely, or that fail to consider the interests of
those who are significantly affected by their decisions. is trend
reflects a movement away from rules that merely encourage ration-
ality toward rules that encourage reasonableness. It also reflects
an understanding that, although the market system has achieved
tremendous successes and continues to have enormous potential to
serve the common good, this potential can be achieved only if the
corporate/financial sectors are guided by a sense of social purpose.
Private actors have a choice. ey can be proactive and collabora-
tive by acting in a "reasonable" manner that embraces (and is more
explicit about) the social utility of private enterprise and financial
services. Or they can resist this dynamic and face an unsustainable
status quo, an approach that may seem "rational" in the short run
(to the extent that it avoids the costs associated with the initial steps
necessary for change), but that will prove both unreasonable and
irrational, leading to higher compliance and forgone opportunity
costs, diminished public trust, a less effective market system and
potentially far more severe systemic consequences in the long run.
ILLUSTRATION:
CLARE
MALLISON
Law of Reasonable Expectations
Corporations can be proactive and move with the times — or have the times forced upon them
>
REASONABLE
EXPECTATIONS EXTEND
BEYOND THE CURRENT
LAW ... 'TO WHAT IS
FAIR, GIVEN ALL THE
INTERESTS AT PLAY'
| COLUMNS |
BY EDWARD WAITZER
CHANGE AGENT
