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Contracts - Successor Clauses. SS&C Technologies Canada Corp. v. The Bank of New York Mellon Corporation
In SS&C Technologies Canada Corp. v. The Bank of New York Mellon Corporation (Ont CA, 2024) the Ontario Court of Appeal dismissed a contractual appeal, here considering a 'successor clause':[35] Third, BNY turns to the Mellon Trust Agreement’s successorship clause, which provides that the contract binds and grants rights to each party’s “successors”. BNY argues that this clause demonstrates that the number of custodial entities that the term “Client” included was intended to change over time because mergers could add additional subsidiaries to the successor entity.
[36] I disagree because the premise of this argument, that subsidiaries automatically succeed to rights that their parent company succeeds to, is wrong. The term “successors” in the clause presumptively carries its legal meaning and thus refers to corporate successors, which means corporations that assume the rights and liabilities of other corporations through merger, amalgamation, or other means: Heritage Capital, at para. 47; Montreal Trust Co. of Canada v. Birmingham Lodge Ltd. (1995), 1995 CanLII 438 (ON CA), 24 O.R. (3d) 97 (C.A.), at p. 104, citing National Trust Co. v. Mead, 1990 CanLII 73 (SCC), [1990] 2 S.C.R. 410, at p. 423.[1] Because companies have separate legal personalities, a parent company does not become a successor simply because its subsidiary succeeds another company. Doing so would require piercing the corporate veil, which BNY has not alleged: Malik (18A application of Talisman Energy Inc.), 2007 BCSC 739, at paras. 25-29. Likewise, a merger between two parent companies, without more, does not cause one parent company’s subsidiaries to succeed the other parent company or its subsidiaries.
[37] These principles are fatal to BNY’s argument. Successorship is a factual question that BNY, as the party relying on the successorship clause, bore the burden to prove: Genstar Development Partnership v. The Roman Catholic Episcopal Corporation of the Diocese of Hamilton in Ontario, 2019 ONCA 506, 3 R.P.R. (6th) 1, at paras. 17-18, 21. BNY has not met that burden. While BNY succeeded Mellon Financial when the 2007 merger closed, this did not make the former Bank of New York affiliates that BNY acquired successors to Mellon Financial and its rights under the Mellon Trust Agreement. And even if the custodial entities that Mellon Financial owned in 1999 had rights under the Mellon Trust Agreement, BNY has not shown that those former Bank of New York affiliates succeeded them either. Having chosen to obtain the benefits of conducting its business through numerous subsidiaries, BNY must also bear the corresponding burdens of their separate legal personality: Brunette v. Legault Joly Thiffault, s.e.n.c.r.l., 2018 SCC 55, [2018] 3 S.C.R. 481, at para. 39.
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