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Letter from the editors.


Where there's a law, there's a loophole. Unintended consequences, both positive and negative, inevitably flow from legislative schemes and regulations and in certain cases have a greater impact than the actual law. Closing such loopholes is a difficult and delicate task, as any changes made with the view of 'improving' the law tend to have unanticipated consequences of their own. The articles in this issue consider unintended consequences in the criminal and corporate law contexts (although unfortunately not the criminal-corporate law context) and propose new frameworks of analysis and action that if not able to vanquish the spectre of unintended consequences at least render it less threatening.

Criminal convictions bring with them civil consequences distinct from the penalty, whether it be imprisonment or fine, imposed on the offender. Until the 2002 Supreme Court of Canada decision in Sauve v Canada, prisoners were denied voting rights under the Canada Elections Act, even though such denial was unrelated to their sentences. Restrictions and prohibitions on the possession of firearms, loss of immigration appeal rights, and severe social stigma are among the current collateral consequences of criminal convictions and sentences. The first article of this issue advocates a new framework for the consideration of collateral consequences in the sentencing process and, to that end, proposes a new classification of those consequences.

Corporations are generally taken to be rational economic actors and laws and regulations in relation to corporations are often understood in terms of costs and incentives. Corporations will shirk their duties as long as it is economically efficient for them to do so, that is, as long as the gains from their behaviour outweigh the costs associated with non-compliance. Moreover, corporate law theorists frequently advocate a regulatory framework that prices corporate penalties efficiently so that enforcement costs do not outweigh the costs imposed on third parties by corporate malfeasance. The three remaining articles in this issue recommend new initiatives to fine-tune this balance.

One examines the current regulation of 'poison pills' under the Ontario Securities Act and the proposed National Instrument 62-105, which aims to protect the rights of target company shareholders through a shareholder voting mechanism, while giving the boards of target companies greater freedom to reject the hostile bid. It then outlines and advocates a permitted bill mechanism, on the grounds that it more completely achieves the objectives of the Act than either the current or proposed regimes. Another of the articles looks at a paradigmatic case of unintended consequences, namely the way in which limited liability perversely incentivizes corporations to render themselves 'judgment-proof' by engaging in asset-stripping. It suggests imputing absolute liability to corporate officers, relative to their degree of knowledge and control, by way of class-based administrative monetary penalties on the basis that such penalties would align the costs of liability with those best-positioned to avoid it, and thereby realign corporate incentives. Our last paper considers the enforceability of preliminary agreements and letters of intent, and, in particular, the negative consequences that follow the award of expectation damages for the breach of binding preliminary agreements where the ultimate contractual objective has yet to be precisely determined. Doing so ironically undermines the very purpose of the good faith agreement to negotiate by implying the existence of a contract where there is none.

New proposals are often best worked out at length, and in that vein, we are pleased to introduce a book review section in our upcoming issue. Books received will be reviewed by the Senior Editors and/or Editors-in-Chief of the Journal. We also accept unsolicited book reviews, which will be subject to the usual double-blind review process.
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Publication:University of Toronto Faculty of Law Review
Date:Mar 22, 2014
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