WWW.LEXPERT.CA
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2018
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LEXPERT 21
Kent, Andrew J.F. McMillan LLP
(416) 865-7160 andrew.kent@mcmillan.ca
Mr. Kent is the National Senior Partner of McMillan LLP. He is recognized both
nationally and internationally as a leading Canadian corporate lawyer. His
practice includes domestic and cross-border transactional, litigation, and
board advice with a focus on debt finance, distressed M&A and restructuring.
He has been both a successful law firm leader and an influential practitioner.
Kelly, Stephen J. Norton Rose Fulbright Canada LLP
(514) 847-4570 stephen.kelly@nortonrosefulbright.com
Mr. Kelly is national leader of our business law group, practices corporate
and securities law, with particular emphasis on corporate finance and
M&A. Regularly acts for public issuers, underwriters and investors in
public offerings and private placements. Also frequently advises boards
and independent committees on governance matters and strategic issues
including major compliance investigations.
Kellerman, Jay C. Stikeman Elliott LLP
(416) 869-5201 jkellerman@stikeman.com
Mr. Kellerman is the Managing Partner of the Toronto office. As a corporate
lawyer for more than 30 years, his clients include public companies, boards
of directors, investment banks and investors. He is recognized as one
of the top mining lawyers in the world, and is a member of PDAC.
Katz, Warren M. Stikeman Elliott LLP
(514) 397-3260 wkatz@stikeman.com
Mr. Katz is head of the Montréal office's Corporate Group and a member
of the Montréal Management Committee. He specializes in corporate finance
and M&A with a particular focus on cross-border M&A, advising issuers and
underwriters on debt and equity offerings and private placements, and acting
for buyers and sellers of both public and private companies, including
well-known US private-equity funds.
Johnson, Andrea C. Dentons Canada LLP
(613) 783-9655 andrea.johnson@dentons.com
Ms. Johnson's practice focuses on corporate and securities law, with an
emphasis on technology and emerging growth companies. She has extensive
experience in the private equity and venture capital area and as lead
counsel on many of the largest VC financings in Canada. She advises TSX-
listed companies on IPOs, financings (including PIPEs), M&A, stock-based
compensation and corporate governance.
Jenkins, William K. Dentons Canada LLP
(403) 268-6835 bill.jenkins@dentons.com
Mr. Jenkins co-leads the M&A Group in Canada and advises on the structuring
and implementation of mergers & acquisitions, equity and debt financings,
project financings and joint ventures. Previously the presiding member of the
Dentons Canada Partnership Board, Bill also served as the first Global Vice
Chair of Dentons from Canada.
LEXPERT-RANKED LAWYERS
their dealings, courts are willing to go along. "It
would be nice to have more guidance from the
court, because it is a matter of common law and
it is the courts who make the law," says Wright.
Despite the lack of legal precedent, he says that
doesn't mean the courts should jump on the issue.
Wright argues the courts should be wary of step-
ping too heavily. "It's really a question of private
contracts between parties and parties agreeing to
allocate risk by means of contract," he says. "It's all
a matter of private agreement, private law."
Many lawyers feel that's the right approach. "It's
not really something that should be legislated one
way or another. I think the current system, which
is really freedom of contract and subject to the par-
ties' negotiations, works very well," says Kraus.
ere is no question that market participants
are giving the issue more attention. In recent years
there has been a steady rise in the proportion of
deals that include a sandbagging clause. Studies
suggest the percentage of deals with sandbagging
clauses — both anti or pro — is roughly half com-
pared with those that remain silent. According to a
2016 report on Canadian M&A by the American
Bar Association, 31 per cent of deals in this coun-
try include pro-sandbagging clauses while 15 per
cent contain anti-sandbagging clauses; 54 per cent
are silent on the issue. So it's almost evenly split.
e good faith principle in Canada can provide
protection for vendors against some sandbagging
tactics. "You have a duty to bargain with one an-
other in good faith, and of course, if you're lying
in the weeds with a claim, a court can find that
you haven't acted in good faith," explains Wright.
"So that's the other way things could turn out.
… Parties address that by being explicit in their
agreements and saying, 'Yes, you can sue us on a
representation that is false that you have knowl-
edge of ' or 'No you can't,' just as a way of allocat-
ing that risk."
When it comes to sandbagging language in an
agreement, the courts tend to accept the objective
intent of the parties, says Kraus. "Once you reach
court, the real question is an evidentiary one as to
what exact knowledge did the person have or not
have," he says.
e issue isn't focused on one sector of the
economy. Sandbagging "is really a universal
question," explains Kraus. "If you take knowl-
edge of pending litigation, for example, or po-
tential claims against the vendor, those sorts of
concerns can really arise in any industry. It really
transcends industry."
e bottom line is that market participants are
well advised to consider carefully the use anti- or
pro-sandbagging language in their deals. Even if
they ultimately decide to remain silent, simply
talking about it is a means of boosting transpar-
ency for both buyer and seller.
