Theorizing Corporate Law in a Mixed Jurisdiction. A Review Essay of Droit des
sociétés par actions: Principes fondamentaux, by Raymonde Crête and Stéphane
Rousseau (Montréal, Les éditions Thémis, 2002, 1008 pp., $80).
1. Introduction
Raymonde Crête and Stéphane Rousseau, who teach at Laval University and at
the University of Montréal respectively, are two of Québec’s foremost contemporary
corporate law scholars. The recent publication of a textbook co-authored by them is thus
in and of itself an event that deserves mention.1 This is especially true in the context of
corporate law scholarship in Québec, where one particular text, that of Martel and
Martel,2 has for all practical purposes exercised a hegemonic domination on that field for
the past thirty years or so. This new publication therefore constitutes not only a most
welcome addition to the corpus of corporate law scholarship in that jurisdiction, but also,
as I will show in this review, a major one, despite the rather modest objectives that the
authors have set for themselves.
First, I shall briefly comment on the pedagogical dimension of their book, after
which I will examine some issues pertaining to substantive law, the most important of
which deals with the “mixity”3 of corporate law sources in Québec. Lastly, I shall discuss
the theoretical approach they adopt in their book and raise some questions about the role
of a pedagogical tool such as a textbook in the creation or perpetuation of doxae in the
1
R. Crête & S. Rousseau, Droit des sociétés par actions : Principes fondamentaux, (Montréal,
Les éditions Thémis, 2002).
2
P. Martel, Précis de droit des compagnies au Québec, (Montréal, Wilson and Lafleur - Martel,
2000).
3
This neologism refers to the condition of a mixed jurisdiction, that is, a jurisdiction the legal
regime of which does not belong to a single legal tradition. It has been argued that mixed
jurisdictions share specific traits, and thus constitute, in and of themselves, a family apart from
the civil law or the common law ones. See generally V.V. Palmer, ed., Mixed Jurisdictions
Worldwide: The Third Legal Family (Cambridge, Cambridge University Press, 2001).
1
field of corporate law,4 which ultimately speaks to the role ascribed to that field in legal
thought. I shall propose in my conclusion some paths for further theoretical reflection.
2. On the Pedagogical Dimension of the Book
I mentioned in the introduction that the objectives of Professors Crête and
Rousseau for their book were modest. Indeed, according to them, this first edition has
been essentially conceived of as an introduction to the fundamental principles and rules
governing the creation, funding and governance of business corporations. 5 It is thus no
surprise to see the extent to which pedagogical concerns played a role in the structuring
and in the conception of the book, which contributes to distinguishing it from a treatise.
In addition to a traditional analysis and critique of the positive law, the book also includes
excerpts of decided cases, questions targeted at the reader, fact-patterns, as well as
corporate forms. Interestingly, however, all this is done in a manner that could be
characterized as “typically civilian”, in that the doctrinal synthesis and critique of the law
forms the main part of the book, while the excerpted cases essentially serve as
illustrations of the principles previously discussed.
Such an approach makes perfect sense in the context of Québec, where the jus
commune in private law matters is the civil law. It bears mentioning for the benefit of
readers unfamiliar with the features of that legal tradition, that doctrine has always played
a significant role not only in the exposition of legal principles but also in their critique,
and thus in the evolution of the law. That being said, enhancing the authors’ theoretical
exposition of the positive law by actual cases as well as fictional fact-patterns is, from a
pedagogical standpoint, a sound decision, as approaching these different forms of texts
forces the readers – recall here that the main audience targeted by the book is composed
of law students – to develop different skills, be they of deductive or inductive nature.
Appealing to different types of learners is thus important, and the authors must be praised
for having taken this into consideration.
4
5
For a definition of the concept of doxa see infra, note 65.
Crête and Rousseau, supra, footnote 1, at p. 2.
2
Another interesting feature of their textbook from a pedagogical standpoint is its
contextual and dynamic approach. Indeed, while it is trite to say that corporate law not
only stands at the interface of several areas of the law, but also speaks, albeit to a
different degree, to other disciplines such as accounting, economics or industrial
relations, most introductory textbooks generally stick to the traditional model of the
classical exposition of the positive law and do not refer to these other bodies of
knowledge. This is not the case with Crête and Rousseau’s text. For them, corporate law
cannot be examined and understood in a vacuum, that is, as a mere set of rules (whatever
their origins), as it itself participates in the socioeconomic evolution of one’s society. For
instance, in addition to the law and economics approach that inspires the entire book, they
do not hesitate to refer to accounting theory to explain and put in context the application
of statutory solvency tests,6 or to collective action theory to explain shareholders’
behaviour.7 Interestingly, by opting for what I have called a contextual and dynamic
approach to corporate law, the authors help to bridge the gap often alleged to exist
between the acquisition of a solid theoretical understanding of a given field of law and
the skills needed to practice it.
I have so far drawn my readers’ attention to the pedagogical dimension of Crête
and Rousseau’s text. From that standpoint, their work deserves to be praised: they have
indeed provided corporate law students – their primary audience – as well as scholars,
practitioners and judges alike with a very well conceived, clearly articulated and
intellectually challenging textbook. Should I ever teach corporate law in French again or
to an audience comfortable enough in that language so as to be able to read a complex
text, I would not hesitate to use it. And should there ever be funding for translating into
English that kind of book, I would certainly support it. Indeed, helping the diffusion of
such a good piece of work also explains why I decided to write this review in English.
That being said, the success of Professors Crête and Rousseau’s textbook as a
pedagogical tool should not prevent us from recognizing the quality of their work from a
substantive law standpoint or from admiring the consistency they demonstrate in
applying a theoretical framework that, as I shall argue in the fourth section of this review,
6
Ibid., at pp. 294-302.
3
is open to some criticism. I will address these two dimensions in turn in the remaining
part of this review, bearing in mind, however, that such a brief review will never do
justice to a book of such quality.
3. On the Substantive Law Dimension of the Book:
Corporate Law’s Contractarianism and Québec’s Bijuralism
As far as substantive law is concerned, it bears noting that one of the authors’
main assumptions, which is factually validated, is that corporate law can increasingly be
described as offering socioeconomic actors the capacity for self-regulation, where
contractual freedom is the rule rather than the exception. Hence the dominance in
corporate statutes of enabling and facilitating rules over mandatory ones, a situation
which is unlikely to change, even in a post-Enron corporate world. As an aside, corporate
law’s contemporary contractarianism could be analyzed as evidence of the enduring
presence in that field of law of the anthropomorphic-anthropocentric model that still
inspires to a certain extent, in spite, or because of, Salomon,8 the theorization of the
corporation.
That being said, coupled with the authors’ adoption of the economic
analysis of the law as their theoretical approach, this emphasis on the contractarian
dimension of corporate law entails consequences on the choice of topics addressed in the
book. For instance, the authors dedicate a full chapter to shareholders agreements, where,
in addition to examining the corporate law and civil law frameworks governing the
different types of such agreements, they provide an unusually thorough analysis of the
most usual clauses found in them.9
As well, still in line with their self-regulatory/contractarian vision of corporate
law, they dedicate almost thirty pages in the chapter on conflict resolution in corporate
settings to alternative dispute resolution mechanisms10. This is a most welcome initiative
7
The authors refer to the work of M. Olson, The Logic of Collective Action: Public Goods and
the Theory of Groups, 2nd ed. (Cambridge, Mass., Harvard University Press, 1971).
8
Salomon v. Salomon & Co., [1897] A.C. 22 (H.L.). For further details on the claim that an
anthropomorphic-anthropocentric model inspires the theorization of corporate law, see this
review’s conclusion.
9
Crête and Rousseau, supra, footnote 1, chapter 7.
10
Ibid., at pp. 887-917.
4
given the increasing popularity of such mechanisms in the corporate sphere. Moreover,
their discussion of these mechanisms is all the more appropriate from a pedagogical
angle, since it is likely to induce their primary audience, that is, corporate law students, to
look at corporate law through a different prism than the pathological one normally
adopted in law schools and which tends to reduce the study of corporate law to that of
juridified disputes resulting in court decisions. While such a perspective is to some extent
inevitable, it obscures the facts that corporate actors are generally eager to avoid litigation
– therefore pointing to the preventative rather than the merely curative nature of
corporate law practice -- and that most of the time corporate law does work effectively
without judicial interference.
I shall address further questions pertaining to the
contractarian conception of corporate law adopted by Crête and Rousseau in the fourth
part of this review.
The second important dimension of their textbook on which I want to focus is the
rather sinuous evolution of corporate law in Québec. Indeed, very early on, corporate
law in that jurisdiction took on a peculiar dimension as a result of a conjunction of factors
that were present when the Civil Code of Lower Canada was enacted in 1866. As the
authors point out, Anglo-American corporate forms were borrowed under the influence of
a business class that was then essentially of Anglo-Saxon origins and whose primary
markets were the United Kingdom and the United States of America, that is, common law
jurisdictions, rather than countries where the civil law prevailed.11 Thus, the reliance on
what initially was a common law model for corporate law in Québec was not due to a
legislative belief in the intrinsic superiority of that model, but was rather the result of a
politico-economic decision.12 But the enduring presence of the common law in an
11
Ibid., at p. 28.
Market- and geography-inspired considerations still influence Québec legislators to some
extent. For example, while contractual partnerships in French law are recognized as having a
legal personality distinct from that of their members, the Québec legislature has decided, in the
Civil Code of Québec, to adhere to the law as it existed under the Civil Code of Lower Canada
and to refuse to recognize them legal personality. This decision was taken essentially because
common law partnerships are not vested with distinct legal personality, which makes them
extremely useful tools in tax planning, notably by allowing the partnership’s losses to be funneled
to its members. However, the National Assembly has yet to show a similar sensitivity to market
and geographic considerations in respect of corporate legislation in Québec. Indeed, the
Companies Act, R.S.Q., c. C-38, which can be accurately described as a ‘patchwork legislation’,
provides corporate actors governed by it with a rather antiquated framework, notably as it regards
12
5
otherwise civil law jurisdiction as far as private law is concerned has forced Québec
jurists to make sense of what David Howes once referred to as the “polyjurality” of
Québec law.13
For instance, several authors tried to determine, particularly in the sixties and
seventies, how to reconcile a private law regime where the jus commune is of civilian
inspiration with a corporate statutory framework, both at the federal and provincial levels,
that clearly embodies common law concepts and approaches.14 While acknowledging the
inescapability for Québec to take into consideration its North American economic and
juristic environment, particularly in the field of corporate law, these authors emphasized
that any attempt at borrowing concepts from the common law had to fit within the
broader conceptual and terminological framework provided by the civil law.15 In that
respect, Crête and Rousseau highlight the enormous significance of title V of the new
Civil Code of Québec as this title reinforces the role of private law (and thus of selfregulation) in Québec corporate law, but in a manner that is consistent with Québec civil
law.16
From the standpoint of the methodology of comparative law, making sense of the
continuing relevance of some common law sources while ensuring that their use does not
distort a legal framework posited as civilian first and foremost requires avoiding an
epistemological obstacle that could be designated as the “craving for convergence”.17
This obstacle stands at the opposite end of another one, the Freudian “narcissism of small
remedies, that would deserve a complete and systematic overhaul. In that regard, it would be
interesting to compare, from the standpoint of the number of “provincial” incorporations, the
relative “performance” of Québec corporate legislation with that of other provinces that have
modernized their corporate laws.
13
D. Howes, “From Polijurality to Monojurality: The Transformation of Quebec Law, 18751929” (1987), 32 McGill L.J. 529.
14
Crête and Rousseau, supra, footnote 1, at pp. 50-59.
15
Ibid., at p. 55.
16
Ibid., at p. 43.
17
The concept of epistemological obstacle, elaborated by French philosopher Gaston Bachelard,
designates the mechanisms, essentially discursive, that cause inertia, stagnation or setback in
knowledge, and that do not have any fixed identity, but which all serve the same “blocking”
function. For example, a metaphor that is constantly reiterated may end up being perceived as
accurately representing the object or subject it seeks to evoke and, in doing so, may prevent
observers from fully grasping the complexity of that object or subject, thereby acting as an
epistemological obstacle. See G. Bachelard, La formation de l’esprit scientifique : Contribution à
une psychanalyse de la connaissance objective, 12th ed., (Paris, Vrin, 1983).
6
differences”, which, for its part, induces jurists to amplify little differences so as to
minimize the actual significance of the commonalities that are perceivable between the
objects compared, or even to deny the possibility that such commonalities might exist,
thereby adopting a postulate of incomparability, or, worse, of incommensurabilty. 18 To
return to the “craving for convergence” obstacle, suffice it to say that this obstacle
induces jurists to brush aside differences between legal systems or traditions for
ideological or pragmatic purposes, in forcing upon the process of comparison
universalistic assumptions so as to obtain results that will reflect the comparatist’s
expectations. Another version of this obstacle arises when observers constantly look for
the all-explaining, unifying rule, be it within a given system of law, or between different
systems of law.19
That craving for convergence is especially likely to manifest itself in today’s
globalized world, where differences are often perceived as impediments to a smooth
functioning of the global economy. Inevitably, that obstacle is especially likely to arise
when a mixed jurisdiction, such as Québec, is surrounded by non-mixed ones in a context
of economic integration. That being said, with both the “craving” or the “narcissism”
obstacles, givens, assumed or desired, end up, on the one hand, obfuscating the
constructivist processes at work in comparative legal endeavours, and, on the other,
obscuring the fact that the objects compared are more often than not constructs
themselves. Crête and Rousseau’s textbook avoids both types of obstacles, but especially
the craving one. For example, in their analysis of the duty of skill imposed upon
corporate directors, they correctly recognize that the application in the Québec context of
the rules of the civil law mandate could lead to the imposition of a more stringent and
objective standard upon corporate directors in that province.20 Had they fallen prey to the
craving obstacle, they would have tried to obscure this difference.
That being said, Professors Crête and Rousseau correctly reject blind and purely
utilitarian imports of common law concepts. Indeed, if the transplant of a legal concept
On comparability, see M. Detienne, Comparer l’incomparable (Paris, Seuil, 2000), and on
commensurability, see H.P. Glenn, “Are Legal Traditions Incommensurable?” (2001), 49 Am. J.
Comp. L. 133.
19
See R. Sacco, “Legal Formants: A Dynamic Approach to Comparative Law” (1991), 39 Am. J.
Comp. L. 1. at p. 21.
20
Crête and Rousseau, supra, footnote 1, at p. 460.
18
7
or tool is to really be successful, its roots must to some extent be relinquished by being
absorbed by the new framework in which that concept or tool is transplanted, that is, by
being recognized by that framework as an endogenous, albeit new, element. This,
obviously, points to the difference between transplanting a rule – which is impossible
because that rule’s new framework cannot but change its nature and possibly its meaning
and scope, thereby transforming it into a brand new rule – and transplanting an idea, a
concept, even a norm,21 which is feasible provided the idea or concept so transplanted is
integrated in its new environment in such a way that this environment is not unduly
upset.22 In other words, the receiving system’s homeostasia must, to some extent, be
maintained.
This type of reflection, albeit formulated in a less theoretical manner, was for a
long time the bread and butter of Québec’s corporate law scholars, for the question of the
sources of law, which is extremely important in any civil law jurisdiction, becomes
critical in a mixed jurisdiction such as Québec.23 In that sense, Crête and Rousseau’s text,
with its subtle grasp of the interaction of the civil law and the common law in Québec’s
corporate law environment, can rightfully claim to continue the work of the late Yves
Caron and Robert Demers. The situation has changed in some important ways since the
writings of Caron and Demers, but Crête and Rousseau are up to the task of making sense
of these changes. The debate about which jus commune ultimately applies in the field of
corporate law in Québec has now been settled in favour of the civil law both by the
National Assembly, in the recently adopted Civil Code of Québec, and, at the federal
21
On the difference between a norm as a concept, and its potential textual expressions in rules,
see E. Le Roy, “Norme (en anthropologie du droit)”, in A.-J. Arnaud et al., eds., Dictionnaire
encyclopédique de théorie et de sociologie du droit (Paris, L.G.D.J., 1993) at p. 403.
22
See: P. Legrand, “What Legal Transplants?”, in D. Nelken and J. Feest, eds., Adapting Legal
Cultures (Oxford, Hart Publishing, 2001), p. 55. On legal transplants, see also A.-J. Arnaud, Pour
une pensée juridique européenne (Paris, Presses Universitaires de France, 1991) at p. 239.
23
Emphasizing the importance of the theory of sources in civilian jurisdiction does not mean,
however, that this theory cannot evolve, nor should it lead observers to blind themselves to the
fact that the modes of production of law in civilian and in common law jurisdictions are
increasingly converging. Indeed, more and more scholars in the civil law tradition argue for a
formal recognition of case law as a source of law, given the substantial impact praetorian law has
on the evolution of positive law. See, inter alia, P. Jestaz, “Source délicieuse (Remarques en
cascades sur les sources du droit)” (1993), 92 Revue trimestrielle de droit civil 73.
8
level, by amendments to the Interpretation Act24.
Nevertheless, there remains the
question of what to do with common law sources in the field of corporate law in Québec,
especially the case law. I think it is fair to say that Crête and Rousseau’s approach to this
question is that, as reformed, the civil law is now globally sufficient to provide an
adequate framework for the adjudication of corporate disputes in Québec, but that
common law sources are still relevant in the interpretation of provisions inspired from
common law jurisdictions. For substantial as well as procedural reasons,25 these sources
will never alone determine the interpretation, but could certainly serve as persuasive
authorities provided they can be (re)conceptualized from a civil law standpoint.26
Throughout their book, Crête and Rousseau show an unflinching will to relocate
the corporate law of Québec within the civil law framework, although without trying to
obscure the continuing relevance of common law sources when appropriate. The end
result is not a bastardized version of the civil law, for there is neither a “pure” model of
civil law, nor a hegemonic model of it,27 but rather an open-textured conception of the
civil law that seeks to maintain its internal consistency and conceptual unity without
Section 8.1 of the Interpretation Act, R.S.C. (1985), c. I-21, reads as follows: “Both the
common law and the civil law are equally authoritative and recognized sources of the law of
property and civil rights in Canada and, unless otherwise provided by law, if in interpreting an
enactment it is necessary to refer to a province’s rules, principles or concepts forming part of the
law of property and civil rights, reference must be made to the rules, principles and concepts in
force in the province at the time the enactment is being applied.”
25
In addition to the clarification of the jus commune applicable in corporate law cases in Québec,
the very idea that a prior case emanating from a higher court could alone, absent a real persuasive
authority, determine the outcome of another one is somehow inconceivable in the civilian
tradition, as this tradition does not formally know stare decisis. See F. Allard, “L’impact de la
Charte canadienne des droits et libertés sur le droit civil: une relecture de l’arrêt Dolphin Delivery
à l’aide d’une réflexion sur les sources du droit civil québécois ” (2003), numéro spécial Revue
du Barreau 3 at p. 23. However, departures from a consistent line of cases emanating from a
higher court (jurisprudence constante), especially a supreme one, are almost equally
inconceivable from a practical standpoint.
26
On persuasive authority, see H.P. Glenn, “Persuasive Authority” (1987), 32 McGill L.J. 261.
27
There may be a conceptual unity amongst the different expressions of the civilian tradition, but
the similarities stop at this stage, as at least two main models have emerged over the past two
centuries: the French and the German ones. If we add to the jurisdictions which have closely
followed one or the other of these models the ones where they have both been sources of
influence, as well as the ones where the civilian tradition has had to interact with another one, for
example the common law or the Confucian tradition, we end up with a striking level of diversity
within the so-called “civilian tradition”. That diversity is further increased by the absence of any
real lingua franca that would link together civil law jurisdictions, this, contrary to the situation
that prevails in the common law tradition where English still serves as a lingua franca.
24
9
adopting fundamentalist attitudes.
This further requires interpreters to develop
considerable skills in comparative law and for this too, the work of Crête and Rousseau
must be commended.
Such a program, however, imposes upon Québec jurists the duty to make full use
of all the tools that the civil law tradition has to offer, and that had at a certain point been
forgotten. The civil law, it is to be remembered, is not reducible to the Civil Code, a
reduction that was unfortunately imposed upon it for some time in the 19th and 20th
centuries in several civilian jurisdictions, including Québec.28 There was indeed a time
where codification was understood as having somehow exhausted the civil law, and thus
unwritten law (that is, usages, customs, equity, and, most often, general principles of law)
was all but forgotten. Moreover, especially in France, the voluntarism associated with
codification, coupled with a longstanding suspicion of judge-made law, led to a
devaluation of praetorian law as a legitimate source of law. While the status of case law
as a formal source of law still raises some debates in France, the very fact that a growing
number of jurists in that jurisdiction now seem inclined not to blind themselves anymore
to the reality of the judge as a creator of law probably indicates the definitive passing of
literalism in the civilian tradition and heralds a much-awaited reconfiguration of the
formal sources of law in that tradition, which, as an aside, is likely to bring the civil law
closer to the common law.29
The attempt by Professors Crête and Rousseau to relocate the corporate law of
Québec within the civil law framework, without trying, as I said, to obscure the
continuing relevance of common law sources when appropriate, is evidenced in several
28
This point was emphatically made by Beetz J. in Cie immobilière Viger v. Lauréat Giguère Inc,
[1977] 2 S.C.R. 67, and has since been reiterated in other cases, most notably, as far as corporate
law is concerned, in Banque de Montréal v. Kuet Leong Ng, [1989] 2 S.C.R.. 429, where, as the
authors point out, the court has found that the concept of reasonable person was broad enough to
encompass the very strict ethical rules elaborated by common law courts. See: Crête and
Rousseau, supra, footnote 1, at p. 453. In Cie immobilière Viger, the Supreme Court recognized
on the basis of general principles of law the existence in the civil law of Québec of an action for
unjust enrichment (de in rem verso) even though the Civil Code of Lower Canada was silent
about it (the Civil Code of Québec now explicitly recognizes this action at arts.1493-96). In Kuet
Leong Ng, the Court’s decision relied upon the general principle of law to the effect that “bien
mal acquis ne profite pas”.
29
For a most interesting – and realistic -- account of the growing recognition of judge-made law
as a source of law, see M. Delmas-Marty, Pour un droit commun (Paris, Seuil, 1994) at pp. 77 et
seq.
10
sections of their work. Different types of situations put them to the task in that regard.
One is when a conflict of interpretation arises within the civil law itself. Another is what
to make of conflicting common law sources that may still exert some influence in
Québec, despite the fact that some of them must now be characterized as prior law (droit
antérieur)30 because of the general characterization of business corporations as “legal
persons established for a private interest” (personnes morales de droit privé).31 Indeed,
some civil law rules that are now clearly applicable, to the exclusion of common law
ones, are still open-textured to warrant forays into the law of other jurisdictions, be they
civil law jurisdictions such as France or common law ones such as the other Canadian
provinces.
An example of the former hypothesis is to be found in the debates about the
interpretation of art. 317 of the Civil Code of Québec, which provides that “in no case
may a legal person set up juridical personality against a person in good faith if it is set up
to dissemble fraud, abuse of right or contravention of a rule of public order.” In essence,
art. 317 codifies what is referred to in English as piercing the corporate veil, bearing in
mind that art. 309 codifies for its part the principle of the limited liability of the members
of artificial persons. The authors challenge the dominant interpretation of this provision,
which is that it creates an autonomous source of liability for shareholders, independent of
the general regime of liability applicable in Québec. They argue instead that this article
does no more than what it says it does, that is, that it prevents the corporation’s legal
personality from being set up against third parties, a rule that must be understood in the
context of the general framework of civil liability.
Since art. 317 is only meant to operate in the context of a regular civil action, and
thus cannot act as an independent source of civil liability, the person trying to shield
30
The authors use this expression at p. 225 in their discussion of the law governing the
representation of the corporation towards third parties, a field of law where common law concepts
were sometimes relied upon before the Québec National Assembly amended the Québec
Companies Act and, later, the Civil Code so as to characterize the relationship between
corporations, on the one hand, and their directors and officers, on the other, as a “mandate”,
thereby leading to the application of the civil law of mandate as provided for in the Civil Code.
31
Civil Code of Québec, arts. 298 and 300.
11
herself (and her personal patrimony32) from the legal consequences of a fraud, an abuse
of right or a contravention of a rule of public order by relying on the legal personality of
the corporation used by her as a tool for performing her unlawful actions, will simply be
prevented from doing so if she is sued under the normal rules of contractual or extracontractual responsibility.
From a civil law standpoint, the reasoning should be as
follows: (1) everyone is liable for his or her wrongful actions that cause injury to another;
(2) exceptionally, the members of an artificial person are not liable for the wrongful
actions of that person, the autonomy of which is legally recognized, unless it is proven
that they have used that person to hide a wrong that can be attributed to them, and that
this wrong constitutes (for art. 317 to find application) a fraud, an abuse of right, or a
contravention of a rule of public order.
As the authors further note, the determining factor here is not that the wrong is
hidden, but that the artificial person has been used to hide it, successfully or not, thereby
creating a legal fiction where the artificial person merely becomes a legal tool devoid of
any functional effectiveness.33 This means that art. 317 is essentially an exception to an
exception, and should be treated as such. As a lower court ruling quoted by the authors
puts it, this provision simply “unlocks the mechanism of immunity protecting the
members of the artificial person”. It bears noting, however, that this mechanism can only
be unlocked in an exhaustive number of situations set forth in art. 317. It is hoped that
Crête and Rousseau’s interpretation of this provision prevail.
That being said, a further example is warranted to illustrate how they relocate
Québec’s corporate law within a civil law framework while still acknowledging the
relevance of common law sources. This speaks to the second hypothesis raised above,
that is, when Québec jurists are faced with conflicting common law sources that may still
exert some influence, without being directly applicable. In this context, there is probably
no part of corporate law that has haunted Québec jurists more than common law fiduciary
duties since, as a matter of principle, the concept of trust upon which they are based does
The patrimony is a civil law concept that designates “[t]he whole of rights and obligations of a
person having an economic or pecuniary value.” See P.-A. Crépeau, ed., Private Law Dictionary,
2nd ed. (Cowansville, Éditions Yvon Blais, 1991) at p. 311.
33
Crête and Rousseau, supra, footnote 1, at p. 147.
32
12
not exist in the civilian tradition, although a civilianized version of it was recently
introduced in the Civil Code of Québec.34
An interesting illustration of the way Crête and Rousseau relocate the question of
the nature and scope of directors’ duties within a civilian framework is to be found in
their discussion of the common law “proper purpose” doctrine, which, in essence,
imposes purposive limits on how directors can exercise their powers. They note that there
are two main approaches to this issue at common law, a stricter one emanating from
Privy Council cases such as Hogg v. Crampton Ltd.35 and Howard Smith Ltd. v. Ampol
Petroleum,36 and a more liberal one originating in the Canadian case of Teck Corp. v.
Millar,37 which was itself criticized on this ground in another Canadian case, Exco Corp.
v. Nova Scotia Savings & Loans Co.38 The authors ask themselves which approach, if
any, should be adopted in the civil law context of Québec, further noting that both of
these common law approaches have exerted some influence on the Québec case law.
In order to answer that question, they first have to determine whether the civil law
imposes upon beneficiaries of a discretionary power a duty to respect the purpose for
which this power was granted. Drawing on Madeleine Cantin-Cumyn’s seminal work on
the management of the property of another39, Crête and Rousseau argue that a corporate
director’s duty to adhere to the purposes for which a power is given is merely an aspect
of the director’s broader duty of loyalty to the corporation. Moreover, imposing the
former specific duty stems from the very notion of power itself, which is defined in civil
law as a purposive prerogative (prérogative finalisée). An inherent limit is thus encoded
in every power, and that very limit calls for the judicial review of improper uses of
directors’ powers. Leaving aside the hypothesis of a radical absence of any power to act,
which the authors also discuss, their main focus is on a corporate director’s use of a
34
For an interesting comparison between the common law trust and the civil law fiducie see M.
Cantin-Cumyn, “La fiducie face au trust dans les rapports d’affaires”, in M. Cantin-Cumyn, ed.,
La fiducie face au trust dans les rapports d’affaires / Trust vs Fiducie in a Business Context,
(Brussels, Bruylant, 1999), at p. 11.
35
[1967] Ch. 254.
36
[1974] A.C. 831 (P.C.).
37
[1973] 2 W.W.R. 385 (B.C.S.C.).
38
(1987), 35 B.L.R. 149 (N.S.S.C.).
39
M. Cantin-Cumyn, L’administration du bien d’autrui, (Cowansville, Éditions Yvon Blais,
2000).
13
power for a purpose that is different from the main purpose for which that power was
granted, a situation which is addressed in civil law by the doctrine of détournement de
pouvoir – literally the highjacking of a power. In that hypothesis, the holder of the power
remains within the objective limits of that power, but somehow distorts the ends for
which the power was conferred.
Having identified a civil law duty to respect the purpose for which a power was
granted, Crête and Rousseau still have to circumscribe the scope of that duty, which
essentially implies examining the reasons underlying the use of a given power in light of
the objectives pursued by the norm granting that power. Drawing on the rich literature
that exists on that topic in French civil law, they note that this examination first and
foremost requires the identification of the end for which the power was granted, and,
most importantly, that civilian doctrine “rejects . . . the approach which consists of
identifying in a precise manner the purpose of a power”, but prefers instead “to
conceptualize the purpose of powers more generally in light of the interests of their
beneficiary . . . .”40 Returning to our original question, this means that of all the
competing common law approaches at play, the one that would be the most relevant in
the context of Québec’s civil law would be a liberal one allowing directors to exercise
their powers for a plurality of purposes, as long as these purposes sustain the
corporation’s interest. Under that view, a détournement de pouvoir would occur when
there is no convergence whatsoever between the purposes inspiring the directors’
decision making process and the corporation’s interest; the mere presence of ancillary
considerations that might have played a role in that process will not be fatal if the main
purpose the directors sought to achieve could reasonably be deemed by them to serve the
interest of the corporation. It is thus clear from the above, as Crête and Rousseau
conclude, that it is the Teck approach that fits best with the civil law framework
applicable to the improper use of a power.41
I believe this example demonstrates the authors’ rigorous approach to
comparative legal analysis and their continuing openness to solutions emanating from
other jurisdictions, albeit in a spirit of fidelity to the system that serves as the springboard
40
41
Crête and Rousseau, ibid., at pp. 500-01. My italics.
Ibid., at pp. 498-501.
14
for the comparison. In the context of Québec corporate law, even if the jus commune in
that field is now clearly the civil law, there will always be a place for some degree of
conversation between the civil law and the common law: it is sometimes a matter of law,
it is often a matter of theory, and it is always a matter of pragmatism. But it may also be,
first and foremost, a matter of attitude. Conversely, remote at best is the hypothesis of a
court in a Canadian common law jurisdiction willfully considering the civil law’s
position on a given legal issue so as to solve a conflict between competing common law
approaches, and even opting in favour of one over the other on the basis of the support
that this “foreign” body of law lends to the selected option42.
As unlikely as it may seem, it should be recalled that until the mid-nineteenth
century, the English law lords themselves were not hesitant to cite classical civilian
authors such as Pothier.43 It could therefore be argued that a Canadian common law court
that does the same would only revive part of its legal heritage. It would also enable
Canada to establish itself as a pioneer in the development of a dialogical and, possibly,
more integrated approach to corporate law. This is a challenge that Europeans are now
tackling and that Canadian jurists, with the exception of a few scholars, have carefully
avoided, in spite of socio-cultural circumstances eminently conducive to this type of
intellectual endeavour.
It is probably true that there are more urgent corporate law issues that require
resolution. Nevertheless, even granting this, this line of inquiry is important because it
bears upon the configuration and working of the Canadian legal psyche. For example,
how is the idea of Canada as a bijural jurisdiction to be understood? Does it simply
imply that there are nine “pure” common law jurisdictions, one mixed jurisdiction
(Québec), and a third one, consisting of the federal legal order, that is almost bicephal in
nature, being generally regarded as a common law jurisdiction, but at the same time
willing to accommodate the needs of the sole provincial jurisdiction that values its
42
Admittedly, there might have been some exceptions here and there. One of the most interesting
ones was the Supreme Court of Canada’s consideration of the civil law in its analysis of the status
of pure economic losses at common law. See: Canadian National Railway Co. v. Norsk Pacific
Steamship Co., [1992] 1 S.C.R. 10.
43
See S. Waddams, Dimensions of Private Law: Categories and Concepts in Anglo-American
Legal Reasoning, (Cambridge, Cambridge University Press, 2003) at p. 6.
15
“mixity”?44 Or could it instead require an increased inter-traditional dialogue, at least at
the federal level, a process that would clearly impose an obligation on the federal legal
order to go beyond mere accommodation of the civil law tradition and wholeheartedly to
embrace it as its own, thereby leading to a recharacterization of the federal legal order as
a mixed, or even a Métis45, one?46
Without going this far, could such a dialogue give rise to a common law rule of
interpretation, more or less akin to the legislative one that recognizes the authority of
both official languages in the interpretation of federal statutes47? This rule would provide
that when a federal statutory provision has to be interpreted in a context that does not
require reference to some provincial jus commune, and when the meaning of that
provision is still ambiguous or not clear enough after resorting to ordinary rules of
interpretation, a court of law must select among the alternative remaining interpretations
the one that is most legitimate from a common and civil law perspective.48 It may very
well be that in most cases the inquiry will not need to go this far since other tools may be
available to solve the interpretive dilemma. However, it may make a difference in some
other cases.49 Even granting this possibility, of all the solitudes that have been said to
44
Alternatively, that federal legal order could be characterized as a pure common law jurisdiction
as it concerns the nine common law provinces, and as a mixed jurisdiction as it regards Québec,
and as far as federal statutory rules which do not refer to any provincial jus commune are
concerned.
45
On the idea of a métissage as the appropriate paradigm to sustain a genuine dialogue between
legal traditions, and, especially, between the common law and the civil law, see: N. Kasirer,
“Legal Education as métissage”, (2003) 78 Tulane Law Review (forthcoming), on file with the
author.
46
The dualistic, rather than dialogical, orientation of rules of federal statutory interpretation, and
the accommodation logic inspiring the philosophy underlying these rules, is evidenced by s. 8.2
of the Interpretation Act, supra, footnote 24, which reads as follows: “Unless otherwise provided
by law, when an enactment contains both civil law and common law terminology, or terminology
that has a different meaning in the civil law and in the common law, the civil law terminology or
meaning is to be adopted in the Province of Québec and the common law terminology or meaning
is to be adopted in the other provinces.”
47
See Official Languages Act, R.S.C., 1985, c. 31, 4th Supp., s. 13.
48
Such a rule of interpretation, which in passing would not contradict s. 8.2 of the Interpretation
Act, would not require Canadian lawyers to be formally trained in both the civil law and the
common law. It would only require from them an increased openness to the other legal tradition,
as well as a will to learn, by themselves or through continuing education, about the structure of
reasoning and the fundamental concepts in that legal tradition.
49
For example, a serious argument could be made that the case Théberge v. Galerie d’art du
Petit-Champlain Inc., [2002] 2 S.C.R. 3 is one of those the outcome of which could have been
different had such a rule of interpretation existed. This case dealt with the interpretation of some
16
exist in Canada, the most enduring one is probably the solitude that exists between the
common law and the civil law50. Professors Crête and Rousseau have accomplished a
provisions of the Copyright Act, R.S.C. 1985, c. C-42, and pitted the three Québec Supreme
Court judges against four of their common law counterparts on the interpretation to be given to an
author’s economic rights that the Act recognizes. Binnie J., writing for the majority, reiterated the
sharp distinction traditionally established in common law jurisdictions between the economic
rights (the rule) and the moral rights (the exception) of the author, and opted for an interpretation
of these economic rights totally impermeable to broader considerations pertaining to the author’s
moral rights. This view was opposed by his three Québec counterparts. Although a serious
argument could be made that a “pure” common law approach did not necessarily warrant the
outcome as decided by the majority, what is more interesting in Binnie J.’s judgment is that it
highlights - and, admittedly, this is my subjective reading - the limits of the “logic of
accommodation” described above, which views the Canadian legal order as a common law one
(see, in particular, paras. 62-72) which accommodates a juridical anomaly, that is, Québec, and
which exceptionally draws inspiration from the civilian tradition, such as in the Copyright Act’s
provisions recognizing the moral rights of the author, in which case that exception has to be
construed restrictively. Suffice it to say that I consider this judgment to be extremely unfortunate
from the standpoint of the establishment of a genuine dialogue between the common law and the
civil law traditions in the interpretation of federal statutory law, a dialogue that could lead, in
some cases, to an intersubjectively legitimate métissage. It is also a missed opportunity to elevate
the Canadian judiciary to the rank of a leader in the current debate about the globalization of
private law. A similar comment could be made about the Supreme Court’s take on maritime law,
as expounded in cases such as ITO-International Terminal Operators v. Miida Electronics Inc.,
[1986] 1 S.C.R. 752, and Q.N.S. Paper Co. v. Chartwell Shipping Ltd., [1989] 2 S.C.R. 6, and to
a lesser extent, Ordon Estate v. Grail, [1998] 3 S.C.R. 437, where this field of law, as a federal
body of rules independent of the ten provincial jus communes, was ontologically viewed as a
common law one, and this, even in Québec where, for example, civil law rules of extracontractual liability are displaced by a common law framework that is unknown to most lawyers
and citizens, thereby raising a further problem of legitimacy that, I regret to say, is not entirely
unlike the one that arose when, in the Royal Proclamation of 1763, the British Crown imposed
upon the residents of the newly-constituted Province of Quebec a private law framework that was
unknown to them. It might be that this segment of federal law is more historically linked to the
common law (although, as McLachlin J. pointed out in her opinion in the Chartwell Shipping
case, the common law pertaining to maritime law has itself been heavily influenced by
international law and civil law), but, in any event, the alleged need for uniformity across Canada
in that field did not necessarily warrant privileging one legal tradition and erasing the other.
Maritime law and intellectual property law are indeed fields where the need for some panCanadian uniformity is justifiable, but the means by which the desired uniformity is achieved
does not have to be a zero-sum game where one wins and the other loses. A strong argument can
thus be made that these are areas of law where cross-cultural legal aspirations should probably
weight more than considerations pertaining to the genealogy of these areas of law, especially if
one considers that the genealogy of any field of law is often quite complex, rarely univocal, and
sometimes reflect a logic of métissage rather than one of purity. Most importantly, we are talking
here about autonomous federal fields of law. So maybe this in itself is a context where, as a
matter of judicial policy, métissage should be recognized as the dominant interpretive paradigm.
50
This is true even if one considers the otherwise laudable efforts made by the Parliament of
Canada to de-essentialize, through the Federal Law-Civil Law Harmonization Act, S.C. 2001, c.
4, language-based understandings of the common law and the civil law, by somehow recognizing
the existence of at least four legal sub-traditions in Canada, that is, the civil law in French and in
17
remarkable feat in showing us how, in the unusual context of an introductory textbook on
corporate law, bridges can be built between these two traditions without compromising
the coherence of either one.
4. On the theoretical dimension of the book: the textbook as a tool for the
establishment or perpetuation of doxae?
This last section of my review of Raymonde Crête and Stéphane Rousseau’s text
could have been ironically entitled “Québec corporate scholarship goes Midwest”.
Indeed, after having noted the decidedly positivistic tone of corporate law scholarship in
Québec, Crête and Rousseau clearly want to depart from that approach by embracing that
of law and economics, the juridical progeny of which is now referred to as the Chicago
school of economics. Moreover, finding Québec scholars’ ignorance or indifference to
law and economics problematic, they advocate a reception of that theory into Québec
legal thought, which, according to them, does not prevent respect for the specificities of
corporate law in a civil law context.51 The qualities of law and economics as a contextprovider for the analysis of corporate law also explain their choice.
Crête and Rousseau are right on all of these counts. It can hardly be disputed that,
indeed, Québec corporate law scholarship has been characterized by a certain acontextual
positivism that can only be enriched by a deeper look at the economic rationales
underlying decision-making processes in commercial settings. They are also correct in
emphasizing the significant heuristic value of law and economics, and in deploring the
minimal impact it has had so far on corporate law scholarship in Québec. It bears noting
in passing, however, that this marginal status of law and economics is more or less the
same in the rest of the francophone world, despite some progress in the last decade partly
due to other Québec scholars.52
English, and the common law in French and in English. This is still a far cry from legal
métissage, though.
51
Crête and Rousseau, supra, footnote 1, at p. 63.
52
For instance, what probably deserves now to be characterized as the leading monograph in
French on the economic analysis of the law, approached from the standpoint of a jurist rather
from that of an economist, was recently published in Brussels by Université de Montréal’s
professor Ejian Mackay. See E. Mackay, L’analyse économique du droit, (Brussels, Bruylant,
18
Although it is not possible in the context of this review to analyze fully the
reasons explaining this situation, one can hypothesize about the language barrier (given
that the bulk of the literature available on law and economics is in English53), the fact that
economics has not achieved in continental Europe and in Québec the kind of dominance
in the social sciences it has in the Anglo-American world, the set of common law
references and assumptions found in most of the relevant literature, the presence of
competing theories, and, more generally, a socioeconomic ideology that is probably less
overtly, if not less enthusiastically, capitalistic than in the United States of America, the
birthplace of law and economics. The context-specific dimension of several important
works in the field of law and economics is not lost sight of by Crête and Rousseau who,
following the lead of scholars such as Ron Daniels and Jeffrey MacIntosh,54 recognize
that the American origins of that theory may distort the analysis in other contexts, and
thus critically apply the theory’s analytical framework so as to ensure that the
specificities of the Canadian market are given due consideration. Such sensitivity to
context, which first and foremost evidences the authors’ intellectual rigor, is to be
commended.
While Crête and Rouseau offer their readers a truly excellent summary of the
basic tenets and trends of law and economics in their first chapter,55 it must be noted that
this theoretical framework permeates the whole book: general topics as well as specific
rules are scrutinized through the prism of the economic analysis of the law.56 Such an
2001). As well, it is a Québec scholar, Yves-Marie Morissette, formerly of McGill University,
and now a justice on the Québec Court of Appeal, who has recently translated for the Presses
Universitaires de France, Ronald Coase’s most important articles which were until then
unavailable in French. See R. Coase, Le coût du droit, (Paris, Presses Universitaires de France,
2001). Lastly, see T. Kirat, Économie du droit (Paris, La Découverte, 1999).
53
While English is clearly not a problem for Québec scholars and thus cannot be counted as a
possible excuse for ignoring law and economics, the same is not true with respect to francophone
jurists from Europe, especially from France.
54
See R.J. Daniels and J.G. MacIntosh, “Toward a Distinctive Canadian Corporate Law Regime”,
(1991) 29 Osgoode Hall L.J. 863.
55
Crête and Rousseau, supra, footnote 1, at pp. 60-100.
56
However, some interesting issues escape such scrutiny, possibly because they were not deemed
central enough in the context of an introductory textbook. For example, in their treatment of the
law governing dividends, Crête and Rousseau excerpt the case McClurg v. Canada, [1990] 3
S.C.R. 1020, on the legality of discretionary dividends, but, regrettably, merely ask their readers
if they believe the case to have been correctly decided, after having noted that Dickson C.J.’s
majority judgment and La Forest J.’s dissenting judgment illustrate two equally fundamental, but
19
approach is perfectly understandable in light of the authors’ wish that this framework be
received in Québec. But, as useful and instructive as economic analysis of law can be,
and as legitimate as the choice of that theoretical framework is, a blanket application of
that grid in an introductory textbook is not, I believe, entirely unproblematic. I shall
explain myself in the next few pages.
Professors Crête and Rousseau correctly remark that the economic analysis of law
has become the dominant paradigm in Anglo-American corporate law scholarship and,
interestingly, use the word “adherence” (adhésion) to refer to people’s attitudes towards
it. They further note that this power of attraction of economic analysis of law is partly
due to its “aptitude at reinforcing traditional legal doctrine by offering jurists a method by
which they can rethink the role of legal institutions and highlight their economic
consequences”.57 In that context, they point to what they call the two fundamental
postulates of the economic analysis of law. The first one is that individuals act rationally
when they make choices, and the second is that individuals are presumed to make
decisions in view of maximizing their self-interest, broadly defined as encompassing their
well-being, their wealth or their utility. In other words, they emphasize the centrality of
rational choice theory for law and economics.58 In that vein, they acknowledge the
different, approaches to the regulation of business corporations (see Crête and Rousseau, supra,
footnote 1, at p. 383). One would have hoped a more thorough analysis of this case from a law
and economics standpoint, especially in light of the nexus of contracts theory. So is the case with
their discussion of the constitutional framework applicable to corporate legislation, where they
note that securities legislation has been found to give rise to the application of the double aspect
doctrine, which thus allows both levels of government to legislate over this topic (p. 184). It is
surprising, however, to see them remain uncommitted with respect to the current debate on
Canada’s patchwork system of securities regulation. It is all the more surprising given their
adoption of the law and economics approach which can certainly provide interesting insights as to
what system would be optimal in the specific setting of a federation. The fact – it is on purpose
that I use the word “fact” here - that a “national”, federally-administered, system of regulation
would be a no-go for Québec might explain their silence.
57
Crête and Rousseau, supra, footnote 1, at p. 61.
58
It should be noted that other postulates can be identified as inspiring rational choice theory. In
a recent book about the epistemology of that theory and other related or competing ones, French
sociologist Raymond Boudon identifies the following ones: (1) methodological individualism; (2)
understandability of individual actions, decisions, attitudes, behaviour, and beliefs; (3) rationality
(broadly conceived) of individual actions, decisions, attitudes, behaviour, and beliefs; (4)
instrumentalism (individual actions may be explained in light of their anticipated consequences);
(5) egocentrism (individuals are primarily interested in the consequences of their actions to the
extent they are themselves affected by these consequences); (6) optimization (individuals will
select a certain option if that option seems more likely than other competing ones to maximize
20
peculiarity of the notion of rationality that is employed in the economic analysis of law,
where rationality essentially designates the ability and propensity to use instrumental
reason to make decisions.59 The rational choice model is thus focusing on process rather
than outcomes. Because of this focus on the decisional process, the authors contend that
the law and economics’ adoption of the rational choice theory is neutral, as it does not
purport, at least initially, to explain individual preferences or to demonstrate that some
choices are better than others.60 Moreover, to their credit, they acknowledge the limits of
the rational choice model, be they related to the bounded rationality phenomenon, or to
the abstract nature of the ideal-typical rational individual it uses as its intellectual
springboard. They further recognize that this model is not necessarily always
representative of the actual behaviour of socio-economic actors;61 let me add in passing
that, as a theory, it does not have to show such a high level of representativeness to be
valid.
The authors also correctly note the utilitarian nature of the law and economics
model, which posits efficiency as the determining factor in the analysis of the allocation
of (scarce) resources. In that context, they point to the two different types of economic
analyses of law that have emerged, descriptive and normative. They highlight the
important heuristic value of the descriptive economic analysis of law as a tool for
identifying and explaining the unanticipated consequences of legal rules.62 They also
accurately describe the basic tenets of the normative strand of economic analysis of law,
which seeks to promote efficiency as the fundamental objective in the elaboration of legal
rules.
They do mention in passing that critiques have been formulated against the use of
efficiency as the ultimate normative factor, notably the critiques arguing that justice and
equity, rather than efficiency, should inspire legal norms.63 Throughout their book, they
their individual benefit when compared with the potential inconveniences of the option selected).
Boudon further notes that some of these postulates can be described as assumptions while others
can be more aptly designated as gambles. See R. Boudon, Raisons, bonnes raisons (Paris, Presses
Universitaires de France, 2003) at pp. 19-22.
59
Crête and Rousseau, supra, footnote 1, at p. 65.
60
Ibid., at p. 66.
61
Ibid., at p. 67.
62
Ibid., at pp. 70-72.
63
Ibid., at p. 74.
21
make similar acknowledgements here and there. But in the end it is not entirely clear
where they themselves stand in respect of the type of economic analysis they pursue. In
some sections of their book, they seem to adopt the normativist creed about efficiency,
for example when they reiterate that the business corporation’s sole objective is wealth
maximization.64 However, in other sections, they appear more critical of the
consequences of that creed, for example when they refer to the fate of actors who are
forgotten by corporate law, such as employees,65 or when they show some sympathy
toward the expansion of the number of stakeholders to be taken into consideration by
directors in the context of the performance of their fiduciary duties, as was advocated by
the trial judge in Peoples Department Stores Inc.66 Moreover, they generally make very
effective use of the descriptive economic analysis of the law. That being said, while Crête
and Rousseau must be commended for their honesty in acknowledging the existence of
alternative views to the law and economics model, by only mentioning in passing the
critiques of that model, especially in its normative form, they end up marginalizing them,
thereby reinforcing the current doxa in North American corporate law scholarship.67
The concept of doxa, elaborated by sociologist Pierre Bourdieu, designates beliefs
so deeply internalized by social actors that they operate in a more or less unconscious
manner, without any need to be expressly justified anymore. 68 A doxa differs from an
orthodoxy precisely in that the dogma inspiring the latter, not being as deeply ingrained
in the psyche of social actors, needs to be iterated and reiterated in more explicit and
For example, ibid., at p. 395, when they say “The role of corporate law, [in the perspective of
coordinating the diverse resources of the corporation in view of maximizing its worth], is to
ensure that the board of directors be in a position to adequately perform this task.”, or, id., at p.
744, when they say “if we consider the business corporation as a nexus of contracts between
parties in view of maximizing the worth of the company . . . .”
65
Ibid., at p. 415.
66
Peoples Department Stores Inc. (Re) (1998), 23 C.B.R. (4th) 200 (Qué. S.C.), reversed by the
Québec Court of Appeal at (2003), 41 C.B.R. (4th) 225. On 28 August 2003 the Supreme Court of
Canada allowed the application for leave to appeal: [2003] S.C.C.A. No. 133.
67
Ten years ago, Anthony Kronman was already characterizing the influence of law and
economics in the American legal academia to a “central, if unrecognized, orthodoxy”. See A.
Kronman, The Lost Lawyer. Failing Ideals of the Legal Profession (Cambridge, Mass., The
Belknap Press of Harvard University Press, 1993) at p. 226. Precisely because it is often
unrecognized, I deem it more appropriate to refer to it as a doxa rather than as an orthodoxy.
68
Bourdieu describes a doxa as “a silent belief that does not require justification.” See P.
Bourdieu, Homo academicus (Paris, Minuit, 1984), at 153. For an English-language piece
64
22
formal ways.
Moreover, these very iterations and reiterations are to some extent
regulated by those, whoever they are, who have both a vested interest in ensuring
conformity to the dogma and the means to impose it. The passage from an orthodoxy to a
doxa can thus be explained in epistemic terms as the transformation of a construct – a
possible explanation or justification which might have, and generally has, a dogmatic
character – into a given – a former explanation or justification that is now treated as a
fact, the existence and truth of which is hardly challengeable, even though it is at best an
ideal reality.69 As such, the concept of doxa refers to an ideology that has achieved the
highest degree of success possible.
There are obvious limits to the use of a concept such as that of doxa. Indeed,
some, including Bourdieu himself, have used it in such a deterministic manner that it is as
if socio-economic actors were somehow deprived of their subjectivity, and thus of their
capacity for a rational evaluation of intellectual propositions, as a result of immanent
socio-cultural forces that are beyond their control and that act in spite of their will. As
sociologist Raymond Boudon points out, such a view is problematic, firstly, because it
ignores the subjectivity of these actors, and, secondly -- and it is a corollary of this
ignorance of their subjectivity -- because it relies on a theory in which causation is
reduced solely to material causation, that is, to phenomena that are external to the subject.
However, as he further notes, a certain behaviour may result not only from material
processes acting beyond the knowledge of the subject, but also from reasons, more or
less conscious, that are internal to that subject.70
But even bearing in mind this important limit to the concept of doxa, and the need
to acknowledge the importance of individual subjectivity there is still some heuristic
value to that concept, most notably in that it directs us to the question of socialization
processes. If a doxa is successfully established, it can only be the result of a process by
which socio-economic actors have been socialized. However, they are not socialized in
addressing, inter alia, the operation of doxae in the field of law, see generally P. Bourdieu, “The
Force of Law: Towards a Sociology of the Juridical Field”, (1987) 38 Hastings L.J. 805.
69
In a nutshell, the concept of ideal reality (réalité idéelle) designates representations that
permeate one’s consciousness to the point that these representations end up being assimilated to
actual realities. See M. Godelier, L’idéel et le matériel: pensée, économies, sociétés (Paris,
Fayard, 1984).
70
R. Boudon, supra, note 55, at p. 15.
23
general;71 they are socialized by institutions, through the transmission of values or
beliefs, in their family, at school, or within their groups of peers. And they are socialized
by concrete means or persons: sanctions imposed upon them at school or in their family,
the rabbi’s teachings or the priest’s sermon, popular culture, home works and, yes, legal
textbooks.
And this is precisely where my main – and probably only -- point of contention
with Crête and Rousseau’s textbook lies. A textbook is an instrument of socialization of
future lawyers, which means that the theoretical approach chosen by its authors risks
being the one adopted by the students who will use it. In other words, they might end up
conceiving of a whole field of law through the lens of the theoretical approach adopted in
that textbook. It does not mean that they are condemned to adhere forever to that
theoretical approach, as they will continue to develop themselves intellectually, but it is
probably fair to hypothesize that a first exposure to a whole field of law through any
theoretical approach will leave a significant, almost prescriptive, imprint in the minds of
many of them.
Although I acknowledge that such a type of socialization is inevitable
and that, in any event, law students need to be socialized to their discipline in one way or
another, it is my belief that an introductory text should strive as much as possible to
alleviate the potentially perverse effects of socialization through a theoretical approach
that is presented in a quasi-hegemonic manner, whatever that theoretical approach might
be.
I am not sure that Professors Crête and Rousseau have entirely succeeded in this
respect. Indeed, their otherwise legitimate choice of the law and economics model as
their main theoretical framework soon becomes problematic given the very small space
they allow competing approaches.
First, their relegation of competing theories to a few paragraphs and some
footnotes is questionable from a critical and historical standpoint. As a consequence of
their adoption of the law and economics model, they unsurprisingly subscribe to the
71
It is indeed important to realize that an explanation that contents itself with simply saying that a
given behaviour is the result of an individual’s socialization actually does not explain anything. It
merely remarks “the existence of correlations for example between the characteristics of the
education received by a group of individuals and their behaviour, without saying anything about
the nature of the mechanisms underlying these correlations.” (translation) See R. Boudon, ibid.,
at p. 11.
24
definition of the firm as a nexus of contracts. I shall comment on this definition and its
normative consequences later.
However, in so doing, the authors fail to examine
competing theories that they refer to as being outside the scope of the first edition of their
book. This is what they say, for instance, of theories advocating that corporate law
should take into account the interests of all those who have a stake in the firm rather than
only those of the shareholders envisaged as residual claimants, as proponents of the nexus
of contracts theory would argue.72 And what about theories that contend that firms should
act in a more socially responsible manner, given the negative externalities that they often
produce? Crête and Rousseau also do not refer to theories that have exerted some
influence in the past or explain why they have fallen out of fashion.
This absence of a more developed critical and historical perspective is even more
problematic in the bi-jural context in which their work will find its primary audience.
Indeed, given their avowed goal to relocate corporate law in Québec within a civilian
framework, I would have expected at least a brief mention of the institutional theories of
the firm that dominated for quite some time in France and Germany, and that still inspire
some corporate law rules in these jurisdictions, most notably in the field of governance.
Although such institutional theories might now be found outmoded from a law and
economics standpoint – for instance, imposing representation of employees on the board
is probably not efficient in the short term -- they did provide a framework where the
interests of several stakeholders were considered and where the firm itself was defined as
being more than the sum of its shareholders. In a post-Enron corporate world, this might
be worth some meditation 73
Secondly, the authors’ marginalization of competing views has the effect of
justifying and thus reinforcing the doxa of law and economics in North American
corporate law scholarship. I have no quarrel with them when they contend that the law
and economics adoption of rational choice theory is prima facie neutral, as it does not
purport, at least initially, to explain individual preferences or to demonstrate that some
72
Crête and Rousseau, supra, footnote 1, at pp. 414-415. See also at p. 83.
Of course, this raises a fundamental question as to how directors and officers can create and
maintain in the minds of the employees of a firm, and of other stakeholders, a level of trust in
their management that is sufficient to legitimize their decisions. On the question of the
managerial trust, see generally B. Chapman, “Trust, Economic Rationality and the Fiduciary
Obligation” (1993), 43 U. T. L.J. 547.
73
25
choices are better than others. Moreover, the fact that rational choice theory’s postulates
cannot claim absolute neutrality does in no way radically vitiate that theory. For these
reasons, I am not inclined to dispute that, despite the non-neutrality and perfectible
character of its postulates as well as the debatable nature of their normative
consequences, rational choice theory probably still offers one of the most, if not the most,
convincing models available in the social sciences74 to explain the behaviour of social
actors.75 To some extent, we could say that this theory is reasonably neutral.
But that rational choice theory is reasonably neutral does not mean that law and
economics, especially in its normative form, is. As useful as it is, particularly in its
descriptive strand, the economic analysis of law is a theoretical framework that is not as
neutral as some of its proponents say it is, since it not only encodes several postulates
about decisional processes, but also about the identity and hierarchy of relevant social
actors. Actually, the problem is not so much that these postulates are encoded in the
theory – so are all postulates of all theories -- it is that economic discourse can
superficially claim a level of scientificity that other social sciences can hardly claim, as it
is often able to hide ideology under the veil of explanations or figures presented as “hard
facts”. The same is not really possible for competing moral or ethical theories, the
ideological character of which is much more difficult to disguise. As such, it is much
easier to depict the discourse of law and economics as descriptive of factual givens rather
than as participating in the elaboration of ideological constructs. Faced with a discourse
that presents itself as objective and scientific76, the audience is thus induced to conceive
74
I include law in the social sciences on the basis of the very broad definition given by Paul
Ricoeur to the disciplines comprising this umbrella concept as “the sciences of the man in
society”. See P. Ricoeur, “Herméneutique et sciences sociales”, in P. Amselek, ed., Théorie du
droit et science (Paris, Presses Universitaires de France, 1994) at p. 19.
75
This explains why scholars from different fields, from sociology to law, try to perfect it rather
than to reject it. For such recent attempts to refine that theory’s postulate of rationality, see, in the
field of sociology, R. Boudon, supra., footnote 55, and the Spring 2002 issue of the review
Sociologie et Sociétés, devoted to the theme “La théorie du choix rationnel contre les sciences
sociales? Bilan des débats contemporains”. See (2002) XXXIV (1) Sociologie et Sociétés 3-173.
In the field of law, see B. Chapman, “Rational Choice Theory and Categorical Reason” (2003),
151 U. of Pennsylvania L.R. 1171.
76
Indeed, as was noted by Yves-Marie Morissette, the influence of law and economics is partly
attributable to its reliance on demonstrations that, superficially at least, meet the “falsifiability”
test posited by the still dominant Popperian epistemology. This, obviously, brings its discourse
closer to that of hard sciences. See Y.-M. Morissette, “Présentation”, in R. Coase, supra, footnote
26
of what is essentially a normative prescription as being a factual information, a process
that undeniably facilitates the creation of doxae.
In order to decode that kind of discourse, and to distinguish between more or less
serious uses of the law and economics theoretical framework, a supplementary effort of
an epistemological nature is thus required from the audience. With due respect for law
students enrolled in their first corporate law course, I do not think that this is the kind of
questioning in which most of them want to be involved, or are even interested in. This is
why I am of the view that, as instructive as the economic analysis of the law can be, and
as legitimate as the choice of that theoretical framework is, a blanket application of that
grid in an introductory textbook is not entirely unproblematic, especially if insufficient
space is allowed for competing theories. Instead, I would argue that, given the audience
targeted and the unrivalled capacity, in the legal field, of the law and economics
discourse to create doxae,77 such extra space should deliberately be made by the authors
of any textbook adopting that theoretical framework. Law students might then come to
realize that while law and economics insights are often accurate and helpful, especially
when they emanate from intellectually rigorous scholars,78 they alone might be
insufficient to provide a truly complex account of a firm’s life and of the lives affected by
a firm.
Let me illustrate my point by examining the impact of one of the basic tenets of
law and economics as applied to the study of business corporations, the ‘nexus of
contracts’ theory.
48, p. 7, at p. 20. However, as is the case with any other “scientific” discipline, the quality of the
“facts” used in the demonstration process will have an impact on the scienficity of the outcome.
Indeed, if the demonstration takes as a fact a belief, say, that market allocation of resources is
always the most efficient way to proceed, any outcome of that demonstration can hardly be
envisaged from the standpoint of falsifiability. What is true for psychoanalysis can be equally
true for some applications of law and economics, particularly in its normative expression. As
Ronald Dworkin recently put it, “(…) it is an important feature of law and legal reasoning that
answers are rarely demonstrable.” See: R. Dworkin, “Response to overseas commentators”
(2003), 1 I-CON 651, at pp. 661-662.
77
It would be interesting, for instance, to study the body of corporate law literature published in
English in the USA and Canada in the past fifteen years, and to measure the level of adoption of
the law and economics model in that field.
78
Among the best known are Richard Posner, Frank Easterbrook, and Gary Becker in the United
States; Michael Trebilcock, Ron Daniels and Jeff McIntosh in Canada; and Ejian Mackay in
Québec.
27
It must be stated at the outset that Crête and Rousseau’s explanation of the genesis
of the nexus of contracts theory of the firm, which, as they say, has become the dominant
analytical framework used in corporate law scholarship today, is very good overall. This
theory, suffice it to say, envisages the business corporation, that is the production unit
designated as “the firm” in economic terms, as a “legal fiction which serves as a nexus
for contracting relationships.”79 However, as noted earlier, it is not because a theory is
dominant that it has to be adhered to as the definitive and hegemonically valid
explanation of the object so theorized. Is one who recognizes the significant explanatory
power of that dominant theory prevented from acknowledging its limits, or from refining
that theorization? This is especially true in the field of law where theories are, by
definition, soft ones, because of their ideological nature.
Saying, for instance, that a business corporation is a nexus of contracts implies a
reduction – which, admittedly, is what any theory implies -- but that reduction is
ideological, as Crête and Rousseau themselves acknowledge, as it purportedly excludes
from the analysis social actors, even internal to the corporation, who are affected by what
business corporations do. While founded on some facts, a legal theory is a partial reading
of these facts. Since any theory must have a focal point, there is nothing wrong with that,
provided that this ontologically ambiguous nature of legal theories, dominant or
otherwise, is acknowledged, which can hardly be done when such theories accede to the
status of doxae.
Indeed, with its radically individualistic bent, the nexus of contracts theory ends
up denying the collective entity that arises, from a sociological standpoint, from the
multiplicity of contractual relationships and which asserts its autonomy from the
individual authors of these “contracts”. Moreover, the contracts (this concept being
defined more broadly in economic theory than in law) that are concluded in corporate
contexts often involve situations of significant imbalances of power that limit, and
sometimes eliminate, the margin of choice enjoyed by the parties. But, as Crête and
M.C. Jensen and W.H. Meckling, “Theory of the Firm: Managerial Behaviour, Agency Costs
and Ownership Structure” (1976), 3 J. Fin. Econ. 305 at p. 311.
79
28
Rousseau admit, economists do not care that much about the conditions or circumstances
presiding over the formation of the contracts from which the firm emerges.80
It is arguable, however, that a legal theory should. Furthermore, by defining the
firm as a web of contract-like relationships between the owners of the different resources
needed by the firm to function efficiently, the nexus of contracts theory adopts a
perspective that is purely internal to the firm, and disregards the standpoint of other
actors potentially affected by that firm’s actions81. Thus, in this way, considerations
pertaining to any purported social role of the firm are more easily obscured. Crête and
Rousseau are thus right to say, as I mentioned earlier, that the attraction of economic
analysis of law lies in part in its “aptitude at reinforcing traditional legal doctrine by
offering jurists a method by which they can rethink the role of legal institutions and
highlight their economic consequences”.82 Jurists may indeed rethink that role, but
always within the predetermined parameters of a certain libertarian legal order. A willful
submission of lawyers to any economic dogma, be it from the right, as is the case here, or
from the left, as is the case in some circles – especially anti-globalization ones nowadays
-- might ultimately lead to an abdication by the law of its aspirational role.
Lastly, as Crête and Rousseau once again note, most of the proponents of the
nexus of contracts theory end up prioritizing shareholders’ interests over those of other
80
Crête and Rousseau, supra., footnote 1, at p. 79.
It is arguable, from a theoretical standpoint, that the nexus of contracts doctrine is broad
enough to encompass actors who, such as creditors, are formally external to the firm, but whose
position and role as resources providers could nonetheless entitle to qualify as “contractors” for
the purpose of that doctrine. However, the legal appropriation of that doctrine has somehow
relegated to the margin its potentially broader economic understanding, most notably through
corporate law’s “shareholdercentricism”. In the same sense, an author has recently argued that the
peculiar type of contractarianism advocated by the law and economics movement has also
strongly contributed, due to its emphasis on efficiency, to prevent that due consideration be
given, in law, to the interests that these actors have in the corporation, albeit in an indirect
manner. His reading of the law and economics’ approach to this issue as it pertains to creditors is
that imposing upon corporate directors the duty, in some circumstances, to take into account the
interests of the corporation’s creditors would undermine efficiency, and, moreover, that creditors
must be presumed to be able to protect themselves, notably through contractual mechanisms.
This author disagrees with that approach and argues instead that efficiency should not be the sole
criterion to consider. Rather, he believes that fairness should also play a major role in the law’s
analysis of claims made by such formally external actors. I agree. See: A. Keay, “Directors’
Duties to Creditors: Contractarian Concerns Relating to Efficiency and Over-Protection of
Creditors”, (2003) 66 Modern L.R. 665.
82
Crête and Rousseau, supra., footnote 1, at p. 61.
81
29
corporate actors, because, on one hand, they form the only group of participants that has
an interest in maximizing the value of the corporation and, on the other, of their corollary
position
as
residual
claimants.
While
explainable
to
some
extent,
this
“shareholdercentricism” may lead to problems, as shareholders controlling a substantial
number of shares might sometimes be tempted to adopt radically opportunistic strategies
so as to maximize their short-term gains, and this, even at the expense of the
corporation’s interest. This hypothesis is especially likely to materialize in large public
corporations with both a fragmented shareholding class and a small number of more
important, albeit not necessarily controlling, shareholders. Coupled with the
“internalism” of the nexus of contracts theory, this shareholdercentricism reinforces, and
legitimizes, the shareholders’ not merely selfish tendencies – which might be considered
acceptable if unpleasant – but first and foremost the propensity for greed that some of
them share, even if, admittedly, the economic analysis of the law does not ignore the
problem of negative externalities83. Evidence of this is to be found, I think, in the
opportunistic behaviour recently shown by some hedge funds, which have played a
significant role in the well-publicized demise of some important corporations.
Once again to their credit, Crête and Rousseau do acknowledge the problems
caused by this shareholdercentricism and briefly mention some of the critiques leveled
against it. But still, one might regret that they do not really speak to these critiques,
justifying this choice, in a rather eerily positivistic manner, by the significant influence
that the conception of shareholders as residual claimants has on the law, most notably on
the law of fiduciary duties.84 For instance, they correctly state that the dominant view is
that directors and officers do not, as a matter of principle, have to take into consideration
the interests of corporate actors other than shareholders when making decisions about the
83
But while the concept of greed may aptly characterize the actions of some shareholders, there
are other actors who sometimes willfully ignore the negative externalities caused by corporate
action. Governments are such actors, and they seem to be particularly willing to blind themselves
to such negative externalities in a transnational economy where jurisdictions compete to draw
investors. Indeed, to what extent could it not be said that there exists a dynamic that induces these
jurisdictions to ignore negative externalities, or to minimize their fight against them, so as to gain
immediate benefits at the expense of long-term objectives? Unfortunately, situations like this
occur most frequently in developing countries that are in dire need of foreign investments. See:
P. Vallely, J. Clarke & L. Stuart, “Coke adds life? In India, impoverished farmers are fighting to
stop drinks giant ‘destroying livelyhoods’”, The Independent, Friday, July 25, 2003, p. 3.
84
Crête and Rousseau, supra, footnote 1, at p. 83, and at p. 414.
30
corporation -- the interests of those left aside being deemed outside the ambit of corporate
law. It could be argued, however, that given the significant role corporations play in
advanced societies’ economic life, and given the normative power they concretely
exercise over several corporate insiders and outsiders, thereby creating in some cases
quasi-autonomous legal orders (something that is facilitated by the contractarian
inspiration of modern corporate legislation), corporate law itself should address the
normative problems posed by the presence of social actors that it presently neglects to
deal with, but who are either directly involved in the corporation, or substantially affected
by its actions. In that regard, we should not lose sight of the fact that, long ago already,
judges (and, incidentally, scholars) were presented with a choice between conceiving of
the firm as more than the sum of its shareholders, or as a mere tool in the hands of its
shareholders envisaged as residual claimants. The option that won was the latter, as
Crête and Rousseau rightly note.85 But what is more important is to remember that
corporate law’s contemporary shareholdercentricism is not a given but a construct, and
that all constructs can be undone, stare decisis notwithstanding.
That kind of reflection might ultimately point to a need for a reconceptualization
of corporate law as a field of law whose purpose can no more be reduced to purely
instrumental considerations such as economic efficiency, and that can no more disregard
the interests of other socio-economic actors directly or indirectly affected by
corporations. In other words, maybe we should envisage for corporate law a federating
role of some directly relevant topics of private law, such as the determination of the status
and voice of corporate employees during the entire life of the corporation, from its
incorporation to its winding-up or bankruptcy as the case may be? Maybe we should also
consider conceiving of corporate law as a kind of private constitutional law, thereby
recognizing what could be designated as corporate law’s inherent disciplinary impurity?
Notwithstanding these unorthodox, even heretical, hypotheses, it may be time to
ask ourselves whether a complex legal theory of the firm requires slightly less economics
and slightly more sociology? It must by now be clear that my answer to this question is
yes. But more sociology might not be enough. Maybe what is needed is an ethical
85
Ibid., pp. 481-82.
31
reflection on the business corporation’s role and place in modern advanced societies86. In
my view, this requires jurists to move beyond contemporary corporate law’s
shareholdercentricism, and, at a deeper level, requires them to manifest some epistemic
consciousness of the potentially problematic ethical effects of otherwise heuristically
useful theories such as the economic analysis of law.
I shall give but one example of this, drawn from the Crête and Rousseau’s text. In
their discussion of the mechanisms by which corporate law attempts to reduce directors’
and officers’ opportunistic behaviour in decision-making contexts, the authors explain the
economic rationale of the imposition upon these corporate actors of statutory duties of
honesty and good faith, and of care, diligence and skill as follows:
Officers and directors who are considering giving precedence to their own interests at the expense
of the interests of shareholders must bear in mind the risk of transgressing their duties. Indeed,
such a transgression could lead to a suit in damages which would increase the ex post facto cost of
their opportunistic behaviour and decrease as a matter of consequence the benefits resulting from
it. That is how duties regulating the behaviour of officers and directors exert an influence on their
interest in behaving in an opportunistic manner.87
This analysis is undeniably accurate from a law and economics standpoint. But is
it sufficient? I am afraid the answer must be negative. Notably lacking in this
“description” is a reference to the aspirational and ethical dimension of the norms so
rationalized and explained. What is also, and maybe first and foremost, a morally-loaded
decision ends up being trivialized through an excision of the ethical dimension of
decision-making in corporate contexts. Why couldn’t there be objective, or quasiobjective, wrongs in corporate law? It is as if the individual-centered cost/benefits
analysis mandated by rational choice theory, as appropriated by law and economics,
relied on a presumption that corporate officers and directors are somehow thieves in
waiting. But neither of the main postulates inspiring rational choice theory (be it its
methodological individualism, its rationalism, its instrumentalism, or even the postulate
that any individual will prefer the option that maximizes his own interests provided the
costs attached to this option do not outweigh the advantages of choosing it) necessarily
exclude altruism, or considerations not directly related to one’s own immediate economic
86
For an argument that fairness should play a role in the attribution of rights, duties and
responsibilities in corporate law, see: A. Keay, supra, footnote 79.
32
interests.88 Moreover, that kind of analysis is also problematic from the standpoint of
legal theory, as it reflects a rather narrow and impoverished view of legal normativity by
conflating the existence of a legal norm with that of a possible institutional – and judicial
-- sanction. It must however be noted that Professors Crête and Rousseau cannot really be
faulted for not mentioning this in the passage quoted above, since they, alongside
proponents of the New Chicago School, do recognize elsewhere that the legal norms’
expressive function sometimes induce such a high level of compliance amongst social
actors that the existence of a formal institutional sanction becomes less necessary. 89 But
this still leaves unanswered the ethics-related problem identified above.
The reservations that I have just expressed about the authors’ treatment of
competing theoretical frameworks in the field of corporate law, and about their
insufficient discussion of the law and economics model’s limitations in light of
competing theories, should in no way be construed as meaning that their choice of that
very theoretical framework is in and of itself illegitimate. These reservations are to be
understood in the very context in which they were expressed, that is, the review of an
introductory textbook on corporate law, and bearing in mind the significant impact of
such a pedagogical tool in the socialization of students to the law and to the analysis of
phenomena of juridical interest. The shortcomings that I have deemed appropriate to
signal could easily be addressed in another edition of their book, or, dare I say, in a fullfledged treatise. In any event, let it be clear that I will always prefer an introductory
textbook that is theoretically sophisticated, as is Crête and Rousseau’s (even though I
disagree with some of the choices that have been made) to a bland positivistic and
acontextual presentation of the law.
5. Conclusion
A - The need for a complex re-theorization of the firm and of corporate law
87
88
Ibid., at p. 412.
R. Boudon, supra, footnote 55, notably at pp. 16-17 and p. 52.
33
Let me launch this conclusion with a piece of anecdotal evidence. In the two
Canadian anglophone universities where I have taught full-time since the beginning of
my law teaching career, I have had the opportunity to attend several job talks presented
by scholars eager to join legal academia. Many of these talks dealt with corporate law
related issues. What is absolutely striking is that I cannot recall any of the candidates,
successful or otherwise, not adopting to some degree the law and economics model,
either through a real adherence to that model, or feeling the need to use that model to
justify some argument. Indeed, the few candidates who seemed slightly concerned with,
say, ethical issues were doing their best to funnel their argument in such a way so as to
legitimize it through the use, albeit superficial in some cases, of the law and economics
discourse.
That being said, maybe they were right, because one could relatively easily
hypothesize that to be found truly relevant and serious, given today’s corporate law
scholarship Zeitgeist, one has to adopt that model in one way or another, or at least refer
to it. Doing otherwise is risking being received at best with polite smiles, or being cast as
an outsider, albeit a brave one. In any event, for what it is worth, this anecdotal evidence
points to two further hypotheses: either the law and economics framework is indeed so
heuristically powerful that it can legitimately claim some form of hegemony over
corporate law scholarship, or there really is a form of doxa at work in the kingdom of
corporate law scholarship.
But positing these hypotheses as necessitating a choice
between the two would probably be misleading. Indeed, law and economics, particularly
in its descriptive expression, is certainly useful, but it does not prevent it from being at
the same time the source of a doxa. The problem is that in its incarnation as a doxa, the
critical apparatus that scholars need so as to remain conscious of the limits,
insufficiencies and potentially debatable postulates of their own theoretical framework is
seriously weakened. This is as true for law and economics as it is for any other theoretical
framework in a similarly dominant position.90
89
Crête and Rousseau, supra, footnote 1, at pp. 488-89.
For example, it is arguable that the rights theory/discourse/ideology has attained in Canadian
constitutional law scholarship a status roughly similar as that of the law and economics in
corporate law scholarship, in that it has become a doxa, which risks blinding its proponents to its
potentially problematic presuppositions and effects, as well as discouraging radical, but
constructive, criticism of it.
90
34
Recent developments show that courts are being asked more and more frequently
to adjudicate disputes in corporate law settings involving stakeholders with which that
very field of law has never been, or has only been marginally, concerned. Given the still
largely shareholdercentric bias of corporate law, judges are placed in a position where
they have to constantly stretch existing norms to their conceptual limits to do justice to
these claims. As well, while it can be said that the rules governing the management of
business corporations generally work well,91 some cracks have recently appeared, which
has led to panicked reactions from investors, media and even governments. All this
arguably points to the necessity of re-theorizing corporate law in such a way that it will
not always have to overstretch itself, and that it will finally make sense of the role and
position of business corporations in modern advanced societies participating in a
transnational economy. In that respect, I am far from sure that the dominant law and
economics theory, and particularly the definition of the firm as a nexus of contracts to
which a significant number of its proponents adhere, provide an intellectual framework
that is sufficient and open enough, ideologically speaking, so as to lead to a complex
account of the diversity of contemporary firms. This could, in and of itself, set the
foundations of a rather important research program. For now, however, I shall be content
with making a few simple remarks.
First, I would hypothesize that instead of theorizing the firm solely from an
economic perspective focusing on the means by which the resources it needs for
production and wealth maximization purposes are gathered – which leads to nexus-ofcontracts-like theories -- we should also look at what the social functions of a firm are.
This could lead us to inquire about the diverse needs it fulfills in society, what means and
resources it uses to fulfill these needs, how these means and resources are used, and how
91
Indeed, the recent scandals that erupted following the unveiling of dubious practices of
corporate governance should not blind observers to the fact that, generally speaking, corporate
law norms, be they of statutory or praetorian origin, function rather effectively and smoothly. For
instance, it is not because there are still criminal offenses committed that one can say that
“criminal law does not work”, or because there are still wars here and there that one can say that
“international law does not work.” Corporate law should not be treated more harshly in that
regard.
35
these uses affect various socio-economic actors.92 This macro-theoretical springboard
would thus have a functionalist inspiration.
Secondly, if we broaden our examination to what a firm actually does, beyond the
immediate economic relationships that exist between some selected actors within it, and
look at other social actors affected by its activities, we could re-theorize it in a threetiered way in view of providing a more complex juridical account of the firm as a socioeconomic entity that is relatively autonomous of these actors, including those who have
constituted it or those who have invested in it. We could then take stock of, and draw
consequences from, what I have alluded to earlier as corporate law’s inherent impurity.
In a nutshell, the first tier of such a new theory of the firm would more or less
reiterate that a nexus of contracts indeed serves as the springboard for the creation of a
firm and does help sustaining it, but that this alone is insufficient, for the reasons stated
above.
The second tier, which would directly challenge dogmatic conceptions of the
nexus of contracts theory, would posit that the firm is indeed a social institution that must
be understood not only as an aggregate of individual contractual relationships, but as
forming a collective entity that transcends its membership, after having emancipated
itself from them, not only as a result of a legislative or jurisprudential fiat, but also in
concrete sociological terms.93 Besides, it is not the least of the paradoxes that at the very
moment some criticize the deleterious consequences of corporate law’s complacent
shareholdercentricism, we are witnessing shareholders’ revolts as a result of their alleged
lack of power in corporations with a fragmented shareholding class. These revolts, it
must be noted, are often stirred by the actions of a professional managerial class that
possesses a vested class interest in increasing the autonomy of the corporation from its
92
An argument has recently been made that the domination of the nexus of contracts theory is
slowly, but surely, eroding, and is giving way to a theory which conceives of the firm as a
behavioural entity. Alice Belcher describes this theory as relying on the premise that “if a
company is capable of being more than the sum of its parts, then the law should ensure that it is
responsible for the outcomes engendered by its culture/routines/creativity, i.e. for its behaviour.”
See A. Belcher, “Inside the Black Box: Corporate Laws and Theories” (2003), 12 Social & Legal
Studies 359, at p. 370.
93
In that sense, see M. Lizée, “Essai sur la nature de la société par actions” (1994), 39 McGill
L.J. 502.
36
members, an objective that does not necessarily contradict the wealth-maximization
objectives of both the corporation itself and the shareholding class.
In a certain way, this second tier of the theory would draw the ultimate
sociological consequences to be taken from Berle and Means’ classical thesis about the
division of ownership and control.94 It would do so, however, in order to resituate the
firm as a social institution. This would imply taking stock of its collective nature and
would force us to depart from the anthropomorphic model that has inspired corporate law
since its origins – the natural person being the model -- as well as the anthropocentric
model that, in spite of everything, still dominates in law and economics – that individual
shareholders are the residual owners of the corporation. The theorization of the firm is
indeed still ensconced in what I would designate as the “Frankenstein’s paradox”. As Dr.
Frankenstein’s creature, the firm is initially man-made, but there comes a point where the
firm, like the creature, emancipates itself from its creators. However, while we have
come to recognize the relative autonomy of Dr. Frankenstein’s creature, even to the point
where the very name of Frankenstein is now more often associated with the creature than
with its creator, we have failed to do the same with respect to firms, still focusing on their
creators as if they had more sociological or economic importance than their creature,
which is generally not the case. Indeed, it seems time to acknowledge, in the legal realm,
that artificial persons have reached a stage of their evolution where we can no longer
usefully resort to an anthropomorphic model to reflect on their nature, their modes of
functioning and their actions.95 At the very least, it is certainly time to reconsider several
of the consequences flowing from the decision made long ago of juristically equating
them with natural persons.
Theorizing the firm as a social institution is obviously related to the idea of
examining its functions in the social order, and these functions themselves can be
examined from different social perspectives.
For example, the objective of wealth
maximization could be conceived of not only from the standpoint of shareholders, or
investors in general, but also from that of the firm’s employees or of the inhabitants of
the region where it operates, or from other economic actors in that region, whose needs in
94
A.A. Berle and G.C. Means, The Modern Corporation and Private Property, 2nd ed. (New
York, MacMillan, 1956).
37
respect of the corporation would at the very least not be deemed immediately irrelevant in
the field of corporate law. Adopting such a functionalist and relational perspective could,
for instance, change how fiduciary duties are understood in common law jurisdictions, as
there would then be a lesser need for constantly stretching the limits of the otherwise
narrowly defined realm of corporate law in order to take into consideration the impact of
corporate decision-making on socio-economic actors external to the firm.96 As well, it
might help us make sense, in a more systemic way, of the firm’s production of negative
externalities, and thus of the extent of its legal liability, as conceived of in light of its
broader social functions.
Alternatively, a more normative and thus clearly ideological variation could be
enunciated, one that would go directly against the most basic tenet of the normative
economic analysis of the law. This variation would presuppose that a liberal society must
gain something (other than the mere enrichment of the firm’s shareholders) from the
presence of firms, and that firms should be legally conceived of, and defined, as
institutions sustaining broader social aspirations, rather than as mere vehicles designed to
achieve economic efficiency. In other words, firms should justify themselves not only
before their shareholders but also before society at large, and that justification should be
part of the dealings they have with their main institutional and normative interlocutor, the
state.
This in no way assumes, however, that social aspirations and efficiency, as
understood in law and economics, are fundamentally incompatible; nor does it assume
that the objective of individual wealth maximization is inherently problematic. Quite the
contrary. But while recognizing that the latter may indeed help in fulfilling the former,
one must also acknowledge that there are some ways in which one’s quest to increase
one’s individual wealth through a corporate vehicle, or at the expense of an otherwise
socially useful corporate vehicle, may come at a social cost that is indeed too high to be
left unexamined from a corporate law standpoint. Further research would have to be
undertaken regarding the criterion to be used to establish this threshold.
I have just mentioned the dealings that firms have with the state, which is their
principal institutional and normative interlocutor. While the state has the power to enact
95
See J.G. Belley, “Quelle culture juridique pour le 21ième siècle? ” (2001), 80 Can. Bar Rev. 1.
38
juridical norms applicable to firms, hoping that the norms so enacted will help them
fulfill their economic potential (to which we could add their social potential), it also has
to cope, particularly in a globalized economy, with the constant pressures of firms
seeking to improve their competitiveness by inducing the state to lower social protections
benefiting other socio-economic actors, sometimes paving the way to a race to the bottom
in that respect. The problem is that these dealings between states and firms, especially
large ones or trans-national ones, often take place in a socio-economic context where
states are not in a position where they can really negotiate on an equal footing with firms.
So making sense of the firm’s relative social autonomy requires that we conceive of that
autonomy not only in terms of an autonomy acquired from its shareholders or members,
but also in terms of an autonomy acquired from the state itself. Under that view, the firm
is no more a mere legal subject in the positive law framework established by the state; it
is a normative actor in its own right, which interacts with the state, and which sometimes
has the power to coerce the state into enacting norms deemed by that firm to be
sufficiently favourable to its interests. Within the legal order so negotiated with the state,
the firm also exercises power over socio-economic actors (shareholders, officers,
employees, external providers, co-contractors) which could be broadly described as its
various resource providers, be these resources financial, human or material ones. As such,
it is in a position to dictate norms, through a web of internal by-laws, corporate directives
or contractual clauses, that bind the relevant parties and that, altogether, help create a
relatively autonomous private legal order.97
The third tier of the theory would thus posit that the firm constitutes a legal order,
where power is exercised, and where norms, be they negotiated or imposed, are binding
upon all relevant actors.98 It would also posit that this legal order is involved in normative
negotiations with the state, and is thus in a position of relative autonomy vis-à-vis that
state. This would involve an acknowledgment that although the state often benefits from
this situation, it may also suffer from it, and so can other socio-economic actors
metaphorically represented by the state in that context. It must be clear by now that the
96
For an applied analysis of relational theories of contract, see J.-G. Belley, Le contrat entre
droit, économie et société (Cowansville, Editions Yvon Blais, 1998).
97
See generally J.-P. Robé, “L’entreprise en droit” (1995), 29 Droit et Société 117.
98
On the concept of legal order, see S. Romano, L’ordre juridique, 2nd ed. (Paris, Dalloz, 1975).
39
hypothesis on which this third tier of the theory relies is that of legal pluralism, which is
to be conceived of here in its sociological understanding. In contrast with a normative
understanding of legal pluralism, the sociological one does not posit that legal pluralism
is inherently good; it only purports to acknowledge the presence, interaction and
competition of several legal orders in society. In such a framework, any normative
evaluation of the consequences flowing from the presence, interaction or competition of
these legal orders is not a function of the acknowledgement of the existence of legal
pluralism, but of another, more normatively oriented, standpoint. Considering that the
firm’s role is to maximize economic efficiency, or, conversely, that it constitutes an
institution that is vested with a broader social responsibility are such standpoints.
As mentioned earlier, this three-tiered theorization of the firm would obviously
force us to acknowledge the inherent impurity of corporate law (which, for example,
should address corporate employees’ issues as much as it addresses shareholders’ issues),
to reconsider the role ascribed to corporate law, and, possibly, to facilitate its
transformation into a form of private constitutional law, which presupposes to some
extent representing the firm as a network of several socio-economic actors.99 While some
of the ideas elliptically elaborated above have to some extent been voiced by others, it
seems that there is more than ever a need for a meta-theory that would critically build on
some of the insights provided by the economic analysis of corporate activity, but that
would at the same time ensure that some extremely significant socio-economic actors and
phenomena relevant to corporate activity, or resulting from it, be taken into consideration
-- something that economic analysis generally fails to do.
It is my hope that Professors Crête and Rousseau, with their considerable
knowledge and analytical subtlety, will eventually undertake such a project. Ironically,
when I started writing this review of their Droit des sociétés par actions: Principes
fondamentaux, I was expecting to write, say, ten or fifteen pages, and I fear this was also
the expectation of my colleague, Jacob Ziegel, the editor of this review! Instead, it is at
least twice that length. Although such an overflow could surely be attributed to some
distressing prolixity on my part, my own interpretation of it, which admittedly is also the
See G. Teubner, “Nouvelles formes d’organisation et droit” (1993), 19 Revue française de
gestion 50.
99
40
most charitable to my talents as a reviewer, is that this overflow is ultimately a testimony
to the quality of Crête and Rousseau’s textbook, and of its remarkable qualities as food
for thought.
B – The regrettable resilience of radical “shareholdercentricism”: a few concluding
remarks on the Peoples decision
With its meta-theoretical orientation, it is clear that the re-theorization proposal
outlined above would imply more than a mere recognition of the circumstantial interests
of stakeholders traditionally deemed “external” to the corporation, as envisaged from a
shareholdercentric angle. An example where such circumstantial interests were taken into
consideration is provided in the judgment of the trial judge in the Peoples Department
Stores case100. In that case, Greenberg J, of the Québec Superior Court, found that the
directors of a corporation had, in the specific circumstances of the insolvency and
bankruptcy of that corporation, neglected to sufficiently take into consideration the
interests of its creditors, envisaged as stakeholders, and that they could thus be found
liable under s. 122 (1) of the Canadian Business Corporations Act 101. The recognition by
the trial judge of the interests of the creditors and of the duties owed to them by the
directors of the corporation was clearly contingent upon the insolvency and bankruptcy of
the corporation, a situation which practically placed the shareholders in a position where
they could no longer be seriously characterized as “residual claimants” in respect of
corporate assets.
This ruling, which mirrored other ones emanating from common law jurisdictions,
was recently reversed by the Québec Court of Appeal102. Although it is beyond the scope
of this paper to provide a full-fledged comment of the appellate court’s ruling, it is hard,
with respect, not to remark the general conservatism of the court’s reasoning, and, more
specifically, the narrowness of the definition it gives to the concept of corporation. This
reasoning, as will be shown and deplored, evidences the regrettable resilience of a radical
form of judicial shareholdercentricism, which unfortunately highlights the potential
100
Supra, footnote 66.
R.S.C. (1985), c. C-44. On this, see: J. Ziegel, “Creditors as Corporate Stakeholders: The
Quiet Revolution – An Anglo-Canadian Perspective”, (1993) 43 U. of T. L.J. 511.
102
Supra, footnote 66 .
101
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difficulties facing anyone wanting to challenge a legal status quo that is more and more
dissociated from socioeconomic reality.
In the last few pages of this paper, I will briefly focus on what, I believe, are the
two most problematic dimensions of the Québec Court of Appeal’s ruling in the Peoples
case, namely, the theory of the firm it reiterates, and the conception of legal interpretation
underlying it.
Let me deal first with the theory of the firm that inspires the Québec Court of
Appeal’s judgment. Noting at the outset that s. 122 C.B.C.A. imposes upon directors
duties to act in the best interests of the corporation, Pelletier J.A., speaking for the court,
goes on to define what constitutes the corporation, and, in doing so, ends up equating the
interests of the corporation with those of the shareholders103. Further noting that the trial
judge had based his findings solely on s. 122 rather than on other legal provisions, be
they found in the Canadian Business Corporations Act or in the Civil Code of Québec,
which expressly allow for the personal liability of corporate directors towards third
parties, Pelletier J.A., who makes clear that he deems preferable to retain the “traditional
perspective which tends to conceive of the interests of the corporation as coinciding with
those of the shareholders”104, expressly rejects the expansive definition of the corporation
advocated by the trial judge. He justifies this rejection on the following grounds:
I believe that by advocating the expansion of that theory in Canadian law, the trial judge infringes
upon a field that belongs to the legislator in that he imposes upon corporate directors a general
regime of liability benefiting third parties whose interests are allegedly harmed by the
management of these corporate directors. I am not ready to follow that reasoning. In 1978, the
Canadian law was completely revamped and, in that context, the legislator never expressly
accepted the principle of a general regime of liability imposed upon corporate directors towards
third parties.
It seems to me that such a u-turn vis-à-vis traditional thought would have
necessitated a clear and explicit text. And there is no such thing in the law as adopted by
Parliament. It is true that the role of courts has evolved in the past few decades and that judges are
now being vested with a role which is closer to that traditionally vested to elected officials in out
democratic system. It is notably the case with fundamental rights enshrined in the Canadian
Charter of Rights and Freedoms.
However, it is necessary to bear in mind that it is only
exceptionally that courts are called upon to inflect rules of law, or to create them, since their
103
Ibid., paras. 66-69.
42
fundamental role consists in applying them and in sanctioning the will that is expressed in the law.
In the case at bar, I am of opinion that it is not up to courts to decide that corporate law should
evolve in a way that the legislator has not deemed appropriate to retain when it reformed that field
of law.”105
The appellate judge later reiterates his reluctance to move beyond the
“traditional” conception of the corporation in view of embracing a new one that would
dissociate the interests of the corporation from those of the shareholders106.
This warrants some few brief comments. Let me begin with a textual argument:
the duties owed by directors under s. 122 C.B.C.A. are owed to the “corporation” and to
not shareholders. Secondly, and much more importantly, Pelletier J.A. seems to believe
that his major intellectual premise – that the concept of “corporation” is reducible to the
members of that corporation – is so entrenched in corporate law that it can only be
changed by Parliament.
However, the C.B.C.A contains no clear or exhaustive
description of the interests represented by the corporation (the same could be said of the
provisions of the Civil Code of Québec relating to legal persons). Indeed, to make a
positivistic argument of the kind made by the learned judge, it must be said that while
corporate legislation does identify in an oblique manner some defining characteristics of
a corporation, for example, that there must be a share capital and that the corporation is
distinct from its members, nowhere does it purport to define exhaustively and
prescriptively what it is by adopting what the learned judge refers to as the “traditional”
conception of the corporation.
This is different from the conceptualization of partnerships, which are
traditionally defined in a much more specific and prescriptive way107. It may be noted
too that, as far as Québec is concerned, the fact that art. 2188 C.C.Q. states that
partnerships “may also be joint-stock companies, in which case they are legal persons”
only recognizes that there might have been a “contract” at the origins of the corporation.
This should not be read as implying that the definition of the corporation should be solely
104
Ibid., para. 83.
Ibid., paras. 93-96.
106
Ibid., para. 106.
107
See, for example, art. 2186 C.C.Q., and, for an example of a common law province, ss. 2-3 of
the Partnerships Act, R.S.O. 1990, c. P.5.
105
43
envisaged from the standpoint of its immediate members, i.e. the shareholders. As such,
neither the civil law nor the common law preclude the adoption of a broader conception
of the “corporation”, most notably as this concept is referred to in s. 122 (1) C.B.C.A.
For that reason, observers in other Canadian jurisdictions would be wrong to dismiss the
Québec Court of Appeal’s judgment in Peoples on the basis that it emanates from a civil
law jurisdiction. The problem with this judgment has to do with the “theory of the firm”
it espouses, not with a false civil law  common law divide. Actually, in both traditions,
the “traditional view” of the corporation is essentially a jurisprudential and doctrinal
creation, stemming from what I characterized earlier in this paper as the anthropomorphic
and anthropocentric vision of the corporation. In other words, it is only one reading of a
set of provisions and precedents, and in no way is it an a-theoretical given as the judge
seems to think. As such, that “traditional view” is merely a construct that can be replaced
by another judicial construct, unless there is clear evidence that this new construct is
radically incompatible with the prevailing legislative framework.
For my part, I am far from convinced that a broader and more expansive
conception of the “corporation” is incompatible with the present Canadian corporate law
framework, which is much more open-textured than Pelletier J.A. seems to think.
Secondly, while the constant reiteration of the mantra that courts should remain loyal to
the “traditional view” unless directed otherwise by the legislator unfortunately
perpetuates a static and impoverished view of the corporation as a socio-legal actor, the
most disappointing aspect of the Québec Court of Appeal’s judgment has probably more
to do with the theory of legal interpretation that it reflects than with the theory of
corporate law per se. It is troubling, to say the least, to see in a 2003 judgment of an
appellate court a statement such as the following: “it is necessary to bear in mind that it is
only exceptionally that courts are called upon to inflect rules of law, or to create them,
since their fundamental role consists in applying them and in sanctioning the will that is
expressed in the law.” Such a pronouncement regrettably reflects an unsophisticated
conception of legal interpretation, first, in that it relies on a totally outdated distinction
between law as creation and law as application, as if there was no place for the mediation
of interpretation between the two alleged polar extremes, and, secondly, in that it is
reminiscent of a certain literalism that once plagued legal thought in both the civil law
44
and common law traditions. As far as the civil law tradition is concerned, this legicentric
literalism, the impact of which was probably increased as a result of codification, almost
asphyxiated legal thought in the 19th century but was fortunately recognized later as
leading to an intellectual dead-end. Moreover, this literalism never corresponded to what
civilian judges actually did, as they always had to infuse meaning into often extremely
broad provisions, the breadth of which was precisely legislated so as to allow judges to
adapt them to socio-economic evolutions108. Denying that on the basis of a theoretically
shaky and reductive distinction between the application and creation of the law had, and
still has, more to do with rhetoric than with legal imperatives, be they civilian. This is
not to say that concerns for the proper role of courts of law vis-à-vis the legislative branch
are illegitimate. Quite the contrary. But they should not be inspired by fragile theoretical
assumptions, albeit “received” ones, that pass for theoretical certainties.
It is thus to be hoped that the Supreme Court of Canada, which has granted leave
to appeal the decision, will address these questions more thoroughly than the Québec
Court of Appeal, given the importance of this case from both a corporate law and legal
theory perspective.
Jean-François Gaudreault-DesBiens*
*Associate Professor, Faculty of Law, University of Toronto. Unless otherwise indicated, I am
responsible for all translations from French to English appearing in this article. I would also like
to thank Vaughan Black and Jacob Ziegel for their most helpful suggestions in the process of
editing this article.
On interpretation in the civil law tradition, see: C. Baudenbacher, “Some Remarks on the
Method of the Civil Law”, (1999) 34 Texas International Law Journal 333.
108
45