In ugly Rogers fight, B.C. court to decide this week who's really in charge?

The backroom drama that has thrown one of Canada's largest telecom companies into turmoil moved into a B.C. courtroom this week, as both sides ask a judge to rule that they are rightfully in control of the company.

Lawyers working for Rogers Communications Inc.and its rogue chairman, Edward Rogers, faced off in court on Monday. The bitter family drama erupted into public view last monthwhen it emerged that Edward, son of company founder Ted, had tried to oust CEO Joe Natale and replace him with Anthony Staffieri, the company's then-CFO.

Natale got wind of the plot and alerted the board of the company to what was going on. Other members of the Rogers family, including his sisters Martha and Melinda and his mother, Loretta, voted to block Edward's power playand voted to remove him as chair.

But instead of a failed palace coup that saw him removed as chairbeing the end of the story, Edward turned the drama up a notch in Octoberby unilaterally firing five members of the board, replacing them with successors of his choosing and reinstating himself as chair.

WATCH| The battle for control of Rogers Communications moves to the courtroom:

Did Ted Rogerss succession plan play a role in battle for company control?

3 years ago

Duration 3:53

JusticeShelley Fitzpatrick of the B.C. Supreme Court heard arguments from both sides on Monday.

Speaking on behalf of the company, lawyer Stephen R. Schachter argued that Edward Rogers's move to name a new board contravenes the rules that govern how the company is run.

Among other things, Schachter says the new board is invalid because it was not named by a full meeting of all shareholders,and was instead done by the "stroke of a pen" by one person.

"What Edward seeks to do has never been done at [Rogers]," he said, adding that all the family drama behind the scenes is secondary to the issue of good corporate governance. "The why he did it is not why we are here;we are here about the how."

Edward's lawyer, meanwhile, says his client was entirely entitled to do what he did because he is in charge ofall the company's voting shares.

While Rogers shares trade on the Toronto Stock Exchange, only the B shares trade freely. But they don't have voting rights, despite making up about 70 per cent of the company's equity. The A shareshave all the voting rights attached to them, and those are 97.5 per cent controlled by an entity called the Rogers Control Trust, which Edward still leads.

"What's a bit unique about the circumstances is that one shareholder holds 97.5 per cent of the votes,"Ken McEwanargued, adding that there was no need for a shareholder vote since all the votes effectively reside in the trust.

"If there is a consensus among shareholders that holding an in person meeting wouldbe pointless, you need not have to."

Schachtersays the way Edward changed the board is a slap in the face toevery other stakeholder, and goes against the wishes of the company founder, Ted, who specified that such changes have to happen at a full meeting of shareholders.

"It's not just the A shareholders that get to go to a meeting," Schachter said. "The B shareholders whoare non voting, they get noticed."

Family feud

The ugly fight has pitted brother against sister, and even parent against child. In his evidence submissions, Edward produced a statement signed by his mother, Loretta, voicing support for his plan for a new CEO.But in a court affidavit, family matriarchLoretta Rogers says she was misled.

"I very much disagree with Edward's portrayal of the facts," Loretta Rogers said. "I also very much disagree with his personal view that he is entitled to exploit his entrusted position as [chair]to circumvent Ted's wishes."

She said, "It brings me no joy to swear this affidavit. But I feel compelled to do so in light of Edward's conduct, which has put what we built at risk."

When Edward was turfed as board chair, the company named John A. MacDonald, a long time member of the board, as the new chair.

Edward has accused MacDonald and others of continuing to claim a role at the company as a way of empowering and enriching themselves, something MacDonald pushes back strongly against in his own affidavit.

"It is disappointing and completely disingenuous for Edward to suggest that members of the[board]are motivated by a desire to 'entrench' ourselves," MacDonald said. "As Edward is fully aware, at several times throughout this period, the other independent directors and I openly proposed resigning from the board over our concern with Edward's conduct."

"Proper governance cannot simply be ignored when Edward believes it is convenient to do so."

After all the interested parties presented their case, the judge said she wanted some time to consider the evidence but says she plans to come to a decision on Friday.

"Irecognize the urgency of the situation,"Fitzpatricksaid before proceedings adjourned for the day. "Itstrikesmethat everyone is anxious to have a decision made."

The investment community is certainly anxious to see the end of the saga, as the ugly power struggle is weighing on the company's prospects, including the proposed $26-billion takeover of rival Shaw Communications.

Matthew Dolgin, an analyst at Morningstar, believes a court battle could be long and drawn out.

"Normally, we'd more readily dismiss the actions and desires of an ousted chairman, but the complexity of the firm's family control makes it anything but cut-and-dried," Dolgin said.

The 'butt-dial'

The court docs also shednew light on perhaps the most headline-grabbing part of the saga how the plot came to light in the first place

When the story first broke in early October, media reports suggested that Natale got wind of the plan to replace him when Staffieri accidentally called him while discussing the plot with someone else a "butt-dial," in the common parlance.

But the affidavits from Loretta and MacDonald saythe phone call wasn't accidentally dialled by Staffieriat all. In fact, Natalecalled Staffieri, who made the mistake of answering the call, and then forgetting to hang up.

"Mr. Natale advised me that he called Mr. Staffieriand that Mr. Staffieri took the call, leaving the line open," MacDonald said in his affidavit. "Mr.Natale told me that during the 21-minute call, he heard Mr.Staffieri outline a plan to reorganize the company."

Loretta's affidavit echoes this version of events.

"Mr.Natale found out about Edward's plan to terminate and replace him by accident ... when Mr.Natale called Mr. Staffieri and Mr. Staffieri inadvertently picked up the call,"Loretta said.