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Shareholders Remedies in Canada 2012
04-Sep-2012
Shareholders Remedies in Canada 2012
04-Sep-2012 8:00 AM
by Igor Ellyn
Category : Commercial Litigation

Igor Ellyn, QC, CS, FCIArb. and Evelyn Perez Youssoufian

ELLYN LAW LLP

Business Litigation Lawyers - Arbitration & Mediation
Avocats en litiges commerciaux - arbitrage & médiation

20 Queen Street West, Suite 3000. Toronto, Ontario, Canada M5H 3R3

www.ellynlaw.com

 

Table of Contents

 

Introduction ........................................................................................................................2

Shareholder Rights ............................................................................................................... 3

Corporate Statutes ........................................................................................................... . 3

Voting ........................................................................................................................ .. 4

Meetings...................................................................................................................... . 4

Access to Information .................................................................................................. . 6

Articles of Incorporation and By-Laws ............................................................................... .. 7

Shareholder Agreements ................................................................................................. ... 7

Securities Laws ............................................................................................................. ... 8

Shareholders' Remedies ................................................................................................... ... 10

Court Ordered Meetings ................................................................................................ ... 10

Derivative Action ........................................................................................................... .. 12

The Oppression Remedy ................................................................................................ . 16

Reasonable Expectations ........................................................................................... .. 20

Use of the Oppression Remedy by Non-Shareholders ................................................... .. 25

Limitation Period Applicable to Oppression Remedy ..................................................... .. 26

Oppression and Arbitration ........................................................................................ ... 26

Investigations ................................................................................................................ . 28

Appraisal Remedy ........................................................................................................ ... 31

Winding-up ................................................................................................................... .. 32

Conclusion ........................................................................................................................33

 

This paper is a second revision of a paper entitled “Shareholders Remedies in Canada” first written by Igor Ellyn, QC and Karine de Champlain for a conference of the Centre for International Legal Studies in Whistler, British Columbia, Canada, entitled “Lawyering in the International Marketplace”.  Much of the original paper has been retained but recent case law and updated internet references have been added.  The authors wish to thank Karine de Champlain (now an associate at Ackroyds LLP, Edmonton) for her important contribution to the original article.  The authors also thank their colleague, Orie Niedzviecki, a partner of Ellyn Law LLP, for his contributions to the first revision.

 

Introduction

When advising business clients about doing business in Canada,1 lawyers must turn their minds not only to the kinds of corporate vehicles which Canadian law permits but also the remedies permitted if disputes arise.  In this paper, we highlight the range of remedies available in the common law jurisdictions of Canada to protect shareholders and others from abusive corporate action.

 

Canadian  corporate  statutes 2  place  few  hurdles  in  the  way  of  achieving incorporation.   Any individual over 18 years of age who is of sound mind and is not a bankrupt, or any corporation, may incorporate a company simply by signing articles  of  incorporation  and  presenting  them  to  the  appropriate  government ministry for stamping and registration.

 

In the face of this enabling philosophy, corporate law has been described as a form of constitutional law that attempts to regulate the rights and obligations of those who participate in or who are affected by the corporation3.   A central theme of  this  regulation  is  "the  struggle  to  balance  the  protection  of  corporate stakeholders  and  the  ability  of  management  to  conduct  the  affairs  of  the company in an efficient manner without undue interference".4

 

We will begin by discussing the various sources of shareholder rights, including corporate  statutes,  articles  of  incorporation  and  by-laws,  and  shareholder agreements.     Although  securities  laws  will  also  be  briefly  mentioned,  the securities regime is exceedingly complex and it is beyond the scope of this paper to address it in detail.5

 

We will then discuss the remedies provided by corporate statute to shareholders who are aggrieved by the manner in which management conducts the business and affairs of the corporation, including voting, court-ordered meetings, derivative actions,  the  oppression  remedy,  investigations,  appraisals  and  court-ordered winding-up on the “just and equitable principle”.

 

The oppression remedy section, widely acknowledged to be the most powerful weapon in the shareholder's arsenal of remedies, will   focus on two particular points: the broad definition of "complainant" under corporate statutes, and the manner  in  which  the  courts  have  defined  the  legitimate  expectations  of shareholders and other "proper persons" under the oppression remedy.

 

Shareholder Rights

 

Corporate Statutes

In Canada, a company may be incorporated under either federal or provincial legislation.6 Although the statutes cover broadly the same categories of rights and remedies of shareholders, there are minor variations between the statutes. For the purposes of this paper, we will use the Ontario Business Corporations Act (the "OBCA")7 as our model.   However, counsel should be sure to consult the corporate statute under which the company was incorporated for the appropriate provisions.8

 

The  rights  provided  to  shareholders  under  corporate  statute  can  be  broadly divided into three categories:   Voting rights, rights with respect to meetings, and rights pertaining to access to information.   Each is discussed below.

 

Voting

The right to vote is the most fundamental right accorded to shareholders under Canadian corporate law statutes.   Through voting, shareholders can control the makeup  of  the  board  of  directors 9 ,  which  is  by  statute  responsible  for  the management of the corporation10, and participate in major business decisions affecting the company11. Further, the articles of incorporation and by-laws may impose limits on corporate and intra-shareholder activities.

 

Meetings

A corollary of the right to vote is the right of the shareholder to attend at meetings. Corporate statutes provide for the calling of an annual meeting of shareholders not later than fifteen months following the last held annual meeting, as well as special meetings at any time.12

 

The annual meeting usually involves the election of directors, the appointment of the  auditor  and  the  presentation  of  the  company  financials,  although  other business may also be transacted. Business requiring shareholder approval can be transacted between annual meetings by the calling of a special meeting of shareholders.   The statutes also permit shareholders who hold not less than 5% of the voting shares of a corporation to requisition the directors to call a meeting for any purpose stated in the requisition.13

 

This remedy, found in Section 105 of the OBCA, recognizes a fundamental right of dissident shareholders holding at least five per cent of votes to requisition a meeting   of   shareholders.   The   underlying   policy   seeks   to   ensure   that shareholders  who  can  muster  sufficient  support  to  meet  the  five  percent threshold,  notwithstanding  their  minority  position  and  an  unwilling  board  of directors,  are  able  to  put  forward  matters  for  consideration  by  all  of  the shareholders entitled to vote.14

 

The Court has the power to intervene if the directors fail to convene a meeting within a reasonable time, fail to act honestly or in good faith or fail to exercise business judgment with a view to the best interests of the corporation.15

 

Access to Information

Key to a shareholder's ability to exercise the right to vote is access to information about the business and affairs of the company.   The OBCA, similarly to other corporate statutes, provides that a corporation shall prepare and maintain in a designated place certain types of records.   These include:

 

(a)   the articles and by-laws of the corporation and all amendments thereto;

 

(b)   copies  of  any  unanimous  shareholders  agreements  known  to  the directors;

  

(c)   minutes of meetings and resolutions of shareholders;

 

(d)   a register of directors setting out specified information; and

 

(e)   a securities register setting out certain specified information.16

 

In addition, the corporation is to prepare adequate accounting records and a record  of  directors'  meetings  and  meetings  of  any  committee  thereof. 17 Shareholders and creditors and their agents and legal representatives are to be provided access to the books and records maintained by the corporation during the usual business hours of the corporation and are permitted to take extracts of the records where appropriate.18

 

Shareholders are also entitled to be provided with notice of meetings and related information.    Such notices and materials, including proxy forms and circulars, must describe the nature of the business to be conducted at the meeting "in sufficient  detail  to  permit  the  shareholder  to  form  a  reasoned  judgment thereon".19   For example, it was held in Pace Savings & Credit Union Ltd. v. Cu-Connection Ltd. 20 that a notice was insufficient where a draft agreement had been provided to shareholders.   The draft, it was held, could change substantially throughout the course of negotiation, and could not form the basis on which a reasoned judgment could be formed as to the impact of the transaction.    In Giannotti et al. v. Wellington Enterprises Ltd.,21 the Ontario Superior Court held that the transfer of a principal asset of a corporation was invalid when the notice of the meeting failed to specify in detail the full nature of the transaction and the proposed agreement of purchase and sale.

 

Articles of Incorporation and By-Laws

The  articles  of  incorporation  and  by-laws  of  the  corporation  may  trump  the statutory provisions in some circumstances.   Articles of incorporation and by-laws set out the types and classes of shares the corporation is authorized to issue and the rights of shareholders relative to both the corporation and to owners of other types of shares.   They may set out voting rights, rights to dividends and rights upon dissolution of the company.    They may also contain restrictions on the ability of the shareholder to transfer shares.

 

Shareholder Agreements

Shareholders' agreements may take many forms, from a simple agreement to vote shares in a particular way to unanimous shareholders' agreements, which restrict the powers of the directors of the corporation and transfer those rights and responsibilities to the shareholders.    Such agreements may embellish or supplement  rights  provided  under  corporate  law  statute.     For  example, shareholders' agreements could include provisions such as buyout mechanisms, pre-emptive rights, or drag-along and tag-along provisions on sale of shares. They may also set out definitions of who can be a shareholder and provide for restrictions on transfer of shares.

 

In closely-held corporations, shareholder agreements often include provisions describing or limiting the scope of some shareholders' management functions; plans for succession and undertaking of new corporate opportunities.   Abuse of these provisions by shareholders active in the management of the corporation form the genesis of assertion of shareholders' rights by the minority or other aggrieved shareholders.     How the assertion of rights by minority or aggrieved shareholders  is  limited  by  a  mandatory  arbitration  clause  is  an  important consideration which will be considered in this paper. 

 

Securities Laws

At the time of publication of this article, there is no federal Securities Act in Canada.   However, the government of Canada is moving toward establishment of a national securities regulator through a government   policy called Canada's Economic  Action  Plan. 22 The  Canadian  Securities  Regulation  Regime Transition Office Act was included in the Budget Implementation Act, 2009. The Act provides the legal authority and mandate for a Transition Office. The Budget Implementation Act, 2009 also includes authority for the Minister of Finance to make direct payments (in an aggregate amount not exceeding $150 million) to provinces and territories for matters relating to the establishment of a Canadian securities regulation regime and a Canadian regulatory authority.23

 

On June 23, 2009, Canada’s federal Minister of Finance, announced the launch of the Transition Office which will lead Canada’s effort to establish the Canadian securities regulator. The Transition Office will lead all aspects of the transition, including  the  development  of  the  federal  Securities  Act,  collaborating  with provinces and territories, and developing and implementing a transition plan with respect to organizational and administrative matters.   As it moves ahead, the Government intends to work collaboratively with provinces and territories that are willing to participate in the establishment of a Canadian securities regulator.24

 

Presently, Securities Acts in each province enact an entire regime regulating public  companies  and  their  actions  in  relation  to  the  Canadian  securities market.25 These statutes contain a set of complex rules and regulations overseen by provincial regulatory bodies.   These include rules on voting and access to information, much like the corporate statutes described above, as well as rules regarding disclosure of information to shareholders.   It is beyond the scope of this paper to discuss these statutes in detail.

 

Although  somewhat  beyond  the  scope  of  this  article,  readers  interested  in securities regulation should note that in Ontario, securities legislation is enforced and  administered  by  the  Ontario  Securities  Commission. 26 Securities commissions also exist in the other provinces.27

 

The  Canadian  securities  and  investment  dealer/broker  industry  is  also administered by several self-regulating organizations.     The Investment Industry Regulatory Organization of Canada (IIROC)28 was established in December 2008 as a result of the consolidation of the Investment Dealers Association of Canada and Market Regulation Services Inc.      There are stock exchanges in Toronto (TSX and TSX Venture),29   and Montreal (Canadian Derivatives Exchange)30.

 

Shareholders' Remedies

If the rights given to shareholders are to be effective and worthwhile, it is clear that corresponding remedies must be available to the shareholder to cure their breach.   In the following sections of the paper, we examine some of the remedies made available to shareholders and their application.

 

Court Ordered Meetings

As discussed above, the shareholder meeting plays an important role in the successful exercise of voting rights by shareholders.    The corporate statutes therefore provide the Court with discretion to order a shareholder meeting where a meeting is impeded by lack of quorum or other disruptive action by one or a group of shareholders.

 

In particular, section  106(1) of the OBCA states that the court may "order a meeting to be called, held and conducted in such manner as the court directs" where it is "impracticable" to call a meeting of shareholders or to conduct a meeting  in  the  manner  provided  for  under  the  articles  and  by-laws  of  the corporation or under statute or "for any other reason the court thinks fit".31   The remedy is available on application by a director or shareholder entitled to vote at a meeting.     The classic statement of what is meant by "impracticable" in the context  of  section  106(1)  comes  from  the  judgment  of  the  English  Court  of Appeal in   Re El Sombrero Ltd.32:

 

It is to be observed that the section opens with the words "If for any
reason," and therefore it follows that the section is intended to have,
and, indeed, has by reason of its language, a necessarily wide scope.
The  next  words  are  "...it  is  impracticable  to  call  a  meeting  of  a
company..."   The question then arises, what is the scope of the word
"impracticable"?   It is conceded that the word "impracticable" is not
synonymous with the word "impossible"; and it appears to me that the
question  necessarily   raised  by  the  introduction  of  that  word 
"impracticable"  is  merely  this:  examine  the  circumstances  of  the 
particular case and answer the question whether, as a practical matter, 
the desired meeting of the company can be conducted, there being no 
doubt, of course, that it can be convened and held.


"Impracticability" must be interpreted broadly in order "to govern the affairs of practical men engaged in business."33   In addition, the courts have held that "the right of the shareholders to democratically determine the future course of the company  is  paramount  consideration,  even  when  there  is  ongoing  litigation" between  the  parties. 34    The  fact  that  the  application  is  opposed  should  not preclude the calling of the shareholders' meeting.

 

In appropriate circumstances, the Court may order a meeting to be "called held and  conducted  in  such  manner  as  the  court  directs",  which  provides  broad jurisdiction to the court in terms of the types of orders granted under section 106(1) of the OBCA.   The legislation also provides for ancillary orders that may be granted in the context of the meeting.   For example, the court may order that the  quorum  required  by  the  articles  of  incorporation  and  by-laws  of  the corporation or by the statute "be varied or dispensed with" at a meeting ordered pursuant to section 106.35

 

Derivative Action

 

The  powerful  but  infrequently-used  remedy  of  "derivative  action'  permits  a shareholder  or  other  "complainant"  to  advance  an  action  on  behalf  of  the corporation when the corporation refuses to bring the action itself.   The action is available  to  rectify  wrongs  done  to  the  corporation  itself  rather  than  to  the individual shareholder.   The intent of the remedy is to circumvent the problem of management not taking action to rectify a wrong where they may have been involved in or responsible for the wrong sustained by the corporation.36

 

Standing to begin a derivative action is given to a "complainant", a defined term under the OBCA.   Section 245 of the OBCA defines a "complainant" as:

 

(a) a    registered holder or beneficial owner, and a former registered
      holder or beneficial owner, of a security of a corporation or any of its
      affiliates;

 

(b) a director or an officer or a former director or officer of a corporation
      or of any of its affiliates;

 

(c) any other person who, in the discretion of the court, is a proper
      person to make an application.

 

A person with standing may seek leave to do one of two things:   to "bring an action in the name and on behalf of a corporation or any of its subsidiaries", or to "intervene in an action to which any such body corporate is a party" in order to prosecute, defend or discontinue the action on behalf of the body corporate.37

 

The four statutory pre-conditions necessary to bring a statutory derivative action may be summarized as follows:


(a)   the directors of the corporation or its subsidiary will not bring,
         diligently prosecute or defend or discontinue the action;

 

(b)   the complainant has given reasonable notice to the directors of
the corporation or its subsidiary of his or her intention to seek
leave to commence a derivative action;

 

(c)   the complainant is acting in good faith; and

 

(d)    it  appears  to  be  in  the  interests  of  the  corporation  or  its
subsidiary that the action be brought, prosecuted, defended or
discontinued.38

 

There has been a recent judicial development in the law of Ontario in respect of the approach to the derivative action.   In the 2008 decision of Malata Group (HK) Limited v. Jung,39 the Ontario Court of Appeal held that there is not a bright-line distinction between a derivative action under s. 246 and an oppression remedy claim under s. 248 OBCA.

 

With respect to the notice provision, it was held by the British Columbia Supreme Court in Re Daon Development Corp. 40 that the condition could not be waived, in part because the "condition can be easily performed without undue expense of effort".

 

In Re Loeb and Provigo Inc., 41 the Supreme Court of Ontario discussed the onus of  proof  for  leave  to  begin  an  action,  stating  that  "There  is  an  onus  on  an applicant to bring before the court more than mere suspicion to warrant the granting of leave."   The requirement has been interpreted broadly, and it has been decided that the notice is not required to contain every cause of action that is  eventually  brought  in  the  derivative  action.    The  notice  should,  however, contain enough information to permit the directors to determine the nature and extent of the complaint and it must be delivered to the appropriate parties.42

 

“Good faith” is not a defined term in the in corporate law statutes.   Each case is therefore analyzed on its own terms for indications of bad faith.   Where the Court finds  indications  of  bad  faith  on  the  part  of  majority  shareholders,  leave  to commence the derivative action will be granted if the other pre-conditions are met.   The Court must be satisfied that the derivative action is likely to benefit the corporation and that the corporation will not be unduly exposed to legal costs.

 

Under Canadian common law procedure, "costs" refers to the power of the Court to award some or substantially all of a successful party's legal expenses to be paid by the losing party.     In a complex action, an allegation of shareholder or management fraud or other abuse will result in expensive legal proceedings.

 

In these circumstances, the Court must assess whether the corporation should fund the action and whether the applicant should be obliged to indemnify the corporation for legal costs, including those payable to the impugned party if the action  does  not  succeed.     Further,  if  the  derivative  action  is  against  the controlling shareholder or principal manager of the corporation, the Court must assess the impact on the continued operation of the corporation's business.

 

The final pre-condition to obtaining leave to commence a derivative action is that it "appear to be in the interests of the corporation" that the action move forward. This differs from other provisions of the OBCA which require the courts to be "satisfied" that certain conduct has been carried out.     This pre-condition affords the  Court  a  mechanism  to  provide  relief  to  a  deserving  complainant  where access to all the relevant information was not possible at the time of bringing the motion for leave to bring the action.

 

It is also worth noting that in the typical claim for leave to commence a derivative action, a majority shareholder or senior management have abused his or her power and usurped the rights of the corporation.   However, the derivative action is not limited to claims against other shareholders or management.

 

Where  a  complainant  is  successful  in  persuading  the  Court  that  leave  to commence a derivative action should be given, the Court may make "any order it thinks fit," including, but not limited to:43

 

  • an  order  authorizing  the  complainant  or  any  other  person  to control the conduct of the action;
  • an order giving directions for the conduct of the action;
  • an  order  requiring  that  any  amount  adjudged  payable  by  the defendant in the action shall be paid, in whole or in part, directly to former and present security holders of the corporation or its subsidiary instead of to the corporation or its subsidiary; and
  •  an  order  requiring  the  corporation  or  its  subsidiary  to  pay reasonable legal fees and any other costs reasonably incurred by the complainant in connection with the action.44

 

The Oppression Remedy

The oppression remedy 45 is widely acknowledged as being one of the most powerful weapons in the arsenal of the shareholder.   The remedy was introduced largely in response to the difficulties encountered by minority shareholders in a corporate environment that runs by majority rules.

 

Nearly  80 years ago, the Ontario Court of Appeal enunciated the dilemma of minority shareholders in these words in Re Jury Gold Mine Development Co.: 46

 

He is a minority shareholder and must endure the unpleasantness
incident  to  that  situation.     If  he  chooses  to  risk  his  money  by
subscribing for shares, it is part of his bargain that he will submit to the
rule of the majority.   In the absence of fraud or transactions ultra vires,
the majority must govern, and there should be no appeal to the Courts
for redress.

 

Where  one  group  of  shareholders  abuses  their  power  over  another  group, inequitable results can occur. The result was the introduction of the oppression remedy. Since  its  introduction,  and  since  the  coming  into  force  of  the oppression remedy provision of the Business Corporation Acts in July 1983, the remedy has gained prominence and has developed a large body of jurisprudence across Canada.

 

The Ontario Court of Appeal reiterated the state of the law in the oft-referred to case of Waxman et al.   v. Waxman et al.47 in which Morris Waxman succeeded in recovering nearly $50 million following his dismissal and exclusion from a family business by his brother, Chester Waxman and others.   It was the culmination of a 10-year legal battle, which may see another round as leave to appeal to the Supreme Court of Canada is pending at the time of this paper.   The decision applied the principles espoused 20 years earlier by the same Court in Ferguson v.  IMAX  Systems  Corp. 48  ,  a  case  decided  under  the  Canada  Business Corporations Act. In  essence,  the  oppression  remedy  amounts  to  this:  the  Court  has  a  broad remedial authority where it finds conduct that qualifies as oppressive.   It may make any order it thinks fit to rectify the matters complained of. This explicitly includes setting aside a transaction or contract to which the corporation is a party or amending unanimous shareholder agreements, corporate articles or by-laws, compensating   the   aggrieved   party,   directing   the   corporation   or   other shareholders to purchase the aggrieved shareholder’s share at fair market value and  other  remedies. 49  This  statutory  language  is  to  be  given  a  broad interpretation consistent with its remedial purpose.50

 

Oppressive conduct which occurred before the oppression remedy came into effect and continued may be considered by the Court.51     This is so because the oppression  remedy  is  considered  part  of  substantive  law  that  has  been interpreted as having retrospective effect.52

A "complainant", as defined in s. 245 of the OBCA and referred to above, may apply to a court for an order and where the court is satisfied that

 

(a)   any act or omission of the corporation or its affiliates effects a result;

 

(b)   the business or affairs of the corporation or its affiliates are or have
         been carried on or conducted; or

 

(c)   the powers of the directors of the corporation or any of its affiliates are
         or have been exercised

 

in a manner that is "oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer, the court may make an order to rectify the matters complained of.53

 

The great flexibility of the oppression remedy stems from the inclusiveness of its language, which allows any type of corporate activity to be the subject of scrutiny, and which makes the remedy available to a broad class of individuals.

 

For example, it has been held that "the court has jurisdiction to find an action is oppressive, unfairly prejudicial, or unfairly taken in disregard of the interests of a security holder if it is wrongful, even if it is not actually unlawful."54   In addition, conduct may be isolated or may form a pattern of conduct that is considered oppressive to shareholders.

 

Importantly, it has been held evidence of bad faith or actual unlawfulness is not required to establish conduct as oppressive.   It is the effect of the conduct, and not  the  intention  of  the  party  engaging  in  the  conduct,  that  is  of  primary importance in oppression remedy cases.55     An important element of the use of the  oppression  remedy  is  to  rectify  self-dealing  which  frequently  occurs, particularly in closely-held corporations.56

 

As pointed out above, there is overlap between the oppression remedy under s.248 OBCA and the derivative action under s.246 OBCA.  One situation in which the overlap between the oppression remedy and the derivative action can be found is where directors in closely held corporations engage in self-dealing to the detriment of the corporation and other shareholders or creditors.57 The Court may also permit the fruits of the oppression to be traced into a corporation subsequently established by the oppressing shareholders.58

 

The Court of Appeal has recently questioned whether there is a meaningful distinction between the derivation action and the oppression remedy.      Even though the tests are different, and under s. 247(d) OBCA,   the Court may order the legal fees or other costs reasonably incurred in connection with a derivative action, there is not much distinction in the case of closely-held corporation, i.e., one with relatively few shareholders.59

 

Similar issues have been considered under the parallel provisions of the Canada Business Corporations Act.   In the 2006 case of Ford Motor Co. of Canada Ltd. v. Ontario Municipal Employees Retirement Board,60   the Ontario Court of Appeal also considered the distinction between the derivative action and the oppression remedy and came to the conclusion that there was considerable overlap between the two remedies.

 

Reasonable Expectations

In Brant Investments Ltd. v. KeepRite Inc., 61   the Ontario Court of Appeal held that  the  oppression  remedy  protects  only  the  legitimate  expectations  of shareholders.   Those expectations must be "reasonable under the circumstances and reasonableness is to be ascertained on an objective basis."   In the same case, the Court expressed the concept in the following language:

 

Shareholder interests would appear to be intertwined with shareholder expectations.  It  does  not  appear  to  me  that  the  shareholder expectations that are to be considered are those that a shareholder has as his own individual "wish list". They must be expectations which could be said to have been (or ought to have been considered as) part of the compact with shareholders.

 

A significant development in the law of reasonable or legitimate expectations of shareholders is set out in the recent decision of the Supreme Court of Canada in BCE  Inc.  v.  1976  Debentureholders. 62    In  the  case,  Canada’s  highest  court expounded on the two related inquiries which must be undertaken to determine the reasonable expectations of aggrieved shareholders in a claim for oppression:

 

(1)       Does the evidence support the reasonable expectation asserted by the claimant? and

 

(2)       Does the evidence establish that the reasonable expectation was violated by  conduct  falling  within  the  terms   “oppression”,  “unfair  prejudice”  or “unfair disregard” of a relevant interest?63

 

The Supreme Court of Canada established the following test for proof of the aggrieved claimant’s reasonable expectations:64

 

-     the claimant must identify the expectations that he or she claims have
      been violated by the conduct at issue and establish that the expectations
      were  reasonably  held.   The  question  becomes  whether the  claimant
      stakeholder reasonably held the particular expectation. Evidence of an
      expectation may take many forms depending on the facts of the case.

 

-    The remedy is focused on concepts of fairness and equity rather than on
      legal rights. In determining whether there is a reasonable expectation or
      interest to be considered, the court looks beyond legality to what is fair,
      given all of the interests at play.

 

-    Factors to assist in determining whether a reasonable expectation exists

include:

  • general commercial practice;
  • the nature of the corporation;
  • the relationship between the parties; o  past practice;
  • steps the claimant could have taken to protect itself; o  representations and agreements; and
  • the  fair  resolution  of  conflicting  interests  between  corporate stakeholders.

 

Commercial Practice                      

In   determining   these   issues,   commercial practice is significant in forming the reasonable expectations of the litigations. A departure from normal business practices that has the effect of undermining or frustrating the complainant’s exercise of his or her legal rights will generally (although not inevitably) give rise to a remedy. 65

 

Nature of the corporation   

The size, nature and structure of the corporation are relevant factors in assessing reasonable expectations.   Courts may accord more latitude to the directors of a small, closely held corporation to deviate from strict formalities than to the directors of a larger public company.66

 

Personal Relationships                  

Reasonable  expectations  may  emerge  from the  personal  relationships  between  the  claimant  and  other  corporate  actors. Relationships between shareholders based on ties of family or friendship may be governed  by  different  standards  than  relationships  between  arm’s  length shareholders  in  a  widely  held  corporation.     When  dealing  with  a  close corporation, the court may consider the relationship between the shareholders and not simply legal rights as such.67

 

Past Practice                                     

Past    practice    may    create    reasonable expectations, especially among shareholders of a closely held corporation on matters relating to participation of shareholders in the corporation’s profits and governance. For instance, in where the court found that the shareholders had a legitimate expectation that all monies paid out of the corporation would be paid to shareholders  in  proportion  to  the  percentage  of  shares  they  held,  an authorization  by  the  new  directors  to  pay  fees  to  themselves,  for  which  the shareholders would not receive any comparable payments, was in breach of those expectations.68

It is important to note however that practices and expectations can change over time.   Where valid commercial reasons exist for the change and the change does not undermine the complainant’s rights, there can be no reasonable expectation that directors will resist a departure from past practice.69

 

Preventative Steps                          

Finally, in determining whether a stakeholder expectation is reasonable, the court may consider whether the claimant could have  taken  steps  to  protect  itself  against  the  prejudice  it  claims  to  have suffered.   Thus it may be relevant to inquire whether a secured creditor claiming oppressive  conduct  could  have  negotiated protections  against  the  prejudice suffered.70

 

The legitimate expectations of a shareholder may be affected by the provisions contained in the articles of incorporation and by-laws of the corporation or the provisions of any agreements between shareholders.   They may also be affected by the size and nature of the corporation and general commercial practice. On making a finding of oppression, a court may make "an order to rectify the matter complained of".71

 

It is worth noting that while the complaining shareholder has the burden to show that oppression exists, evidence of fraud or bad faith is not a requirement in order to make out the claim. The conduct must only be shown to be burdensome, harsh and wrongful.72

 

Section 248(3) sets out a number of specific orders that may be made by the court, including, for example:

 

(a)     an order restraining the conduct complained of;

(b)     an order appointing a receiver or receiver-manager;

(c)    an order amending the articles or by-laws of the corporation or the provisions of a unanimous shareholders' agreement;

(d)    an order appointing directors in place of or in addition to the directors then in office;

(e) an order directing the company or any other person to purchase securities of a security holder;

(f)     an order winding up the corporation; and

(g)    an order requiring the trial of any issue.73


In addition, the Court may order the corporation or its affiliates to "pay to the complainant interim costs, including reasonable legal fees and disbursements".74 In order to obtain such an order, the applicant must establish that there is a case of sufficient merit to warrant pursuit and that the applicant is genuinely in financial circumstances which,  but for an order, would preclude the claim from being pursued.75

 

However, where a complainant, a minority shareholder, is unable to persuade the Court that he does not have the resources to pursue the action or fails to disclose his financial circumstances, the Court will refuse to make an order for interim disbursements.76

 

The  management  by  the  Court  of  shareholder  expectations  is  an  important aspect of the oppression remedy.   Even at the interim stage of the proceedings, the  Court's  objective  is  to  maintain  a  semblance  of  the  status  quo  even  if  allegations of oppression have not been fully proved.      In Alizadeh et al. v. Akhavan  et  al. 77 ,  a  judge  of  the  Ontario  Superior  Court  restored  historic payments of management fees to an equal shareholder pending trial without drawing any conclusions about the merit of the oppression allegations. 

 

Use of the Oppression Remedy by Non-Shareholders

As set out above, the definition of "complainant" under the derivative action and oppression   remedy   is   extremely   broad,   including   current   and   former shareholders, current or former directors and officers, and "any other person who, in the discretion of the court, is a proper person" to bring the application.78

 

In First Edmonton Place Ltd. v. 315888 Alberta Ltd., 79 an Alberta case examining the scope of an identical oppression remedy provision in the Alberta statute, the Court identified two circumstances under which a creditor could be considered a "proper person" to bring an application:

 

(a)   where the directors or management of the corporation have used
         the  corporation  as  a  vehicle  for  committing  fraud  upon  the
         applicant; and

 

(b)   where  the  directors  or  management  of  the  corporation  have
         breached  the  underlying  expectations  of  the  applicant  arising
         from the circumstances in which the applicant's relationship with
         the company arose.

 

Based on these principles, the oppression remedy has been available to a trade creditor where the corporation had taken actions to conceal its insolvency,80 and to a wrongfully dismissed employee against former directors where a corporate reorganization  resulted  in  the  corporation  which  paid  the  employee's  salary ceasing to exist.81

 

It has also been used faced by a creditor of a corporation against the corporation and  the  sole  shareholder  and  director  of  the  corporation  where,  through inadvertence, the corporation failed to renew an irrevocable letter of credit in favour of the creditor. The corporation then sold its assets and used the proceeds of the sale to eliminate its debt to the bank. In doing so, it eliminated the liability of its sole shareholder who had personally guaranteed the corporation's debt to the bank. The Court held that the corporation's inadvertent failure to renew the letter of credit and subsequent sale of its assets was conduct which came within the terms of s. 248 of the OBCA.82   These are examples.   There are many other interesting uses of the remedy.

 

Limitation Period Applicable to Oppression Remedy

In  Ontario,  the  limitation  period  applicable  to  all  claims  unless  specifically exempted by the Limitations Act is two years from the date the cause of action arose, subject to discoverability. 83      The two-year limitation period applies to oppression remedy claims under the OBCA.84   The situation is not so clear under the Canada Business Corporations Act.85

 

In the 2006 decision in Ford Motor Company of Canada, Ltd. v. Ontario Municipal Employees Retirement Board,86 the Ontario Court of Appeal, expressed doubt, without reaching a definitive conclusion, as to whether an action for oppression under the CBCA was subject to the six-year limitation period under the Ontario Limitations Act which was in effect until January 1, 2004.87      The former statute contained a reference to “an action on the case”, a concept eliminated by the new Limitations Act.88

 

Again, while no Ontario Court has definitively determined the matter, it may be that the two-year limitation period applies under an OBCA oppression claim but not  to  a  CBCA  oppression  claim.    The  distinction  is  that  a  limitation  period created by a provincial statute may not apply to a cause of action created by a federal statute.89

 

Oppression and Arbitration

In Deluce Holdings Inc. v. Air Canada90, the court was asked to examine in what circumstances  oppressive  conduct  could  operate  to  postpone  arbitration proceedings,  which  were  mandatory  under  the  terms  of  a  shareholders' agreement. In that case, a shareholders’ agreement provided for arbitration for disputes as to value of the shares held by each of the parties in Air Ontario, a regional carrier for Air Canada.   The valuation provision was triggered by the termination of Deluce from his employment as CEO, which was effected by Air Canada  (the majority shareholder) in an effort to obtain  100% control of Air Ontario and to reorganize its corporate operations.

 

Senior Regional Justice Blair (as he then was) of the Ontario Superior Court held that  the  actions  of  Air  Canada  in  removing  Deluce  could  be  found  to  be "oppressive" and that    Deluce's holding corporation  (the minority shareholder) had a reasonable expectation that Mr. Deluce would only be terminated where such a move was in the best interests of Air Ontario.

 

In terminating Deluce, the representatives of Air Canada on Air Ontario’s board of directors had been fulfilling an Air Canada agenda and had paid little attention to the best interests of Air Ontario itself.   Under the circumstances, the court held that  the  entire  underpinning  of  the  arbitration  structure  had  been  destroyed, taking the subject of the dispute out of the purview of the matters to be dealt with under the agreement.   The arbitration was therefore stayed and the oppression remedy action proceeded.

 

Investigations

The  effective  exercise  of  shareholder  remedies  will  frequently  depend  on possessing the relevant information.   An important statutory aid to shareholders in this respect is the court-ordered investigation of the corporation's affairs where the shareholder can satisfy the court that there are circumstances that warrant the court order.    In particular, section  161(2) of the OBCA provides that an investigation may be ordered by the court where it appears to the court that:

 

(a)     the business of the corporation or any of its affiliates is or has
         been carried on with intent to defraud any person;

 

(b)    the business or affairs of the corporation or any of its affiliates are
         or  have  been  carried  on  or  conducted,  or  the  powers  of  the
         directors  are  or  have  been  exercised,  in  a  manner  that  is
         oppressive or unfairly prejudicial to, or that unfairly disregards,
         the interests of a security holder;

 

(c)     the corporation or any of its affiliates was formed for a fraudulent
         or  unlawful  purpose  or  is  to  be  dissolved  for  a  fraudulent  or
         unlawful purpose; or

 

(d)   persons concerned with the formation, business or affairs of the
        corporation or any of its affiliates have in connection therewith
        acted fraudulently or dishonestly.

 

An application for an investigation may be brought by a shareholder without notice to the corporation.91   To balance the needs of the shareholders with the ability of management of the corporation to effectively conduct the business, the hearing of an application under section  161(2) is closed to the public92 and is subject to a publication ban.93

 

It is worth noting that unlike many other provisions of the OBCA, which require the  court  to  be “satisfied”,  the  court  may  make  the  order  granting  the investigation where it "appears" that the impugned conduct fits into the listed categories.    This may result in a lower burden of proof being placed on the shareholder  and  could  be  an  appropriate  remedy  where  an  aggrieved shareholder does not have access to the information required to meet a higher burden.

 

The investigation provisions provide that the court may make any order it thinks fit and proceeds to enumerate twelve specific orders that may be made by the court.94   The most important of these is obviously the order to investigate.95   The other listed orders are ancillary to this general order, generally focusing on the appointment of the investigator and the powers of the inspector once appointed. For example, the investigator may, if so ordered:

 

  • enter any premises in which the court is satisfied there might be relevant information, and examine any thing and make copies of any document or record found on the premises;
  • compel any person to produce documents or records; and
  • conduct a hearing, administer oaths and examine any person on oath.

 

Although the investigation remedy could be of great assistance to shareholders, the courts have traditionally been reluctant to order an investigation unless a shareholder  can  demonstrate  that  the  information  was  not  available  through other means.96

 

Appraisal Remedy

An  appraisal  right  is  the  right  of  a  shareholder  to  require  the  company  to purchase his shares at an appraised "fair value" under certain circumstances. There are three circumstances under which the appraisal remedy is triggered under the OBCA:

 

(a)  where shareholders are granted rights of dissent upon certain
         fundamental changes.   These changes include amendments to
         articles, amalgamations, and sales of all or substantially all of the
         assets of the corporation;97

(b)  compulsory acquisitions, which arise where a person making a
         take-over bid purchases 90% or more of the shares of a particular
         class;98 and

(c)    shareholder's right to request acquisition where he holds 10% or
         less of the outstanding shares of a particular class.99

 

The  OBCA  sets  out  the  procedural  steps  and  timelines  under  which  each appraisal remedy may be exercised, which are beyond the scope of this paper to discuss.      In Re Domglas Inc.,100   the Quebec Superior Court held that "fair value" is the just and equitable value of the shares.     The Court identified four methods to assess value:

 

  • market value: this method uses quotes from the stock exchange;
  • net asset value: this method takes into account the current value of the company's assets and not just the book value;
  • investment value: this method relates to the earning capacity of the company;
  • a combination of the preceding three methods.

 

Winding-up

The dissolution order is "the most drastic form of shareholder relief".101   The OBCA, like other corporate statutes, sets out a number of circumstances under which a court may order a winding-up of the corporation.102   These include where an  oppression  remedy  claim  has  been  met,  where  unanimous  shareholder agreements  provide  the  shareholder  with  rights  to  make  an  application  and, perhaps most importantly, where it is "just and equitable for some reason, other than the bankruptcy or insolvency of the corporation, that it should be wound up." 103    The  court  may  make  any  order  it  thinks  fit  in  connection  with  an application for winding-up.104

 

The courts have, in the exercise of their powers under the "just and equitable" doctrine, made it abundantly clear that each case must be determined on its own facts.    There  emerge  from  the  cases  four  situations  in  which  the  "just  and equitable" rule will be applied: 105

 

  • disappearance  of  substratum:          this  involves  a  failure  of  the fundamental objectives of the corporation.   The cases fall into three categories:

                -   the subject matter of the company is gone,

                -   the object for which it was incorporated has substantially failed, or

                -   it is impossible to carry on the business of the corporation except for at a loss; 106

  • justifiable lack of confidence in the management of the corporation;
  • deadlock; and
  • the partnership analogy.107

 

Conclusion

As noted in the introduction, a fundamental point in corporate law is the struggle to  balance  the  protection  of  corporate  stakeholders  and  the  ability  of management to conduct the affairs of the company in an efficient manner without undue interference.   Shareholders and other interested or affected parties are therefore provided with certain rights and remedies under corporate law, all of which attempt to foster this balance.

 

Endnotes

1   Canada is divided into 10 provinces and three territories.     Corporate law statutes have been enacted by each of the Canadian provinces and by the federal Parliament of Canada.   These include Business Corporations Act(s) and Securities Acts.   Many of these are may be accessed online at www.canlii.org.   The Ontario Business Corporations Act to which reference is made in this paper is found online at www.canlii.org/on/laws/sta/b-16/index.html.   The Ontario Securities Act is online at  www.canlii.org/on/laws/sta/s-5/index.html. Anglo-Canadian common law principles are applicable throughout Canada except for the province of Quebec, which has a Civil Code.  Statutes enacted by the federal Parliament are applicable across Canada.  Provincial statutes in the common law provinces are not fully harmonized but tend to be similar.  Readers are cautioned, however, to verify the applicable law in Quebec.

2    See f.n. 1.

3   J.S. Ziegel et al., Cases and Materials on Partnerships and Canadian Business Corporations, 3rd ed. (Toronto: Carswell, 1994) at 925

4    D.H. Peterson, Shareholder Remedies in Canada (Toronto: Butterworths,1989) at 1.6

5   See reference to Securities Acts online at www.e-laws.gov.on.ca/DBLaws/Statutes/English/90s05_e.htm for the Ontario Securities Act and   for the other provinces and territories at www.canlii.org.

6    See f.n. 1.

7 R.S.O.    1990,  c.B-16.  online  at  www.e-laws.gov.on.ca/DBLaws/Statutes/English/90b16_e.htm.    For  a 

discussion of the oppression remedy under the British Columbia Business Corporations Act, see S. Antle, S. 
Warnett and J. T. Li, And Now for Something Slightly Different: The British Columbia Oppression Remedy, posted March 2, 2007. http://goo.gl/LrfDT.

8   It is beyond the scope of this paper to address the strategic and tax considerations which affect the selection of the most favourable jurisdiction in which to incorporate.

9 OBCA s.119(4)

10 OBCA s.115

11 See for example OBCA s.184(3), which requires shareholders to vote on a sale of "all or substantially all" of the assets of the corporation.

12 OBCA s.94(1)

13 OBCA s.105(1)

14 Paulson & Co. Inc v. Algoma Steel Inc., 2006 CanLII 116 (ON S.C.) at para. 40     See also Airline Industry Revitalization Co. v. Air Canada, (1999), 45 O.R. (3d) 370 (S.C.J.) at 386;McGuinness v. Bremmer Plc, [1988] S.L.T. 891 at 895;

15     Ibid., at para. 41-43.     And see also see Kerr v. Danier Leather Inc., [2005] O.J. No. 5338 (C.A.) at 

para. 157, quoting with approval from Maple Leaf Foods Inc. v. Schneider Corp. 1998 CanLII 5121 (ON

C.A.), (1998), 42 O.R. (3d) 177 (C.A.) at paras. 64-67; .

16 OBCA s.140(1)

17   OBCA s.140(2)

18 OBCA s.145(1), (2), 146(1)

19 See OBCA s.96(6) for notice of meetings and s.30(31) of O. Reg. 62 regarding information circulars.

20 [2000] O.J. No. 3830 (Ont. S.C.)

21   Giannotti v. Wellington Enterprises Ltd. [1997] O.J. No. 574 (Ont. Gen. Div.)

22   www.actionplan.gc.ca/initiatives/eng/index.asp?mode=5&initiativeID=57&clientid=32

23   Ibid., www.actionplan.gc.ca/initiatives/eng/index.asp?mode=5&initiativeID=57&clientid=32

24   Ibid.

25 See  reference  to  Securities  Acts  of  all  Canadian  provinces  and  territories  online  at  http://www.e-
laws.gov.on.ca/navigation?file=tools&lang=en.   The Ontario Securities Act is found online at http://www.e-
laws.gov.on.ca/html/statutes/english/elaws_statutes_90s05_e.htm.

26 Information about the OSC is available online at www.osc.gov.on.ca/.

27 Links to websites of other Canadian provincial securities commissions are found at http://goo.gl/qvq5v and www.bcsc.bc.ca/related_links.asp. In Reference re Securities Act, 2011 SCC 66 , http://canlii.ca/t/fpdwb, the Supreme Court of Canada held that the proposed Canadian Securities Act was ultra vires the Parliament of Canada.

28   www.iiroc.ca/English/Pages/home.aspx 
29   www.tmx.com/en/about_tsx/

30 www.m-x.ca/accueil_en.php

31 OBCA s.106(1)   As to timing of the meeting, the Court relies on the reasonable business judgment of the 
directors acting honestly, in good faith and in the best interests of the corporation and will interfere only if 
that standard has not been met:   Paulson & Co. Inc v. Algoma Steel Inc., 2006 CanLII 116 (ONSC)   paras. 
43 et seq.

32 [1958] 1 Ch. 900 (U.K. C.A.)

33 B. Love Ltd. v. Bulk Steel & Salvage Ltd. (No. 2) (1982), 40 O.R. (2d) 1 (H.C.J.)

34 FTS Worldwide Corp. v. Unique Broadband Systems Inc. [2001] O.J. No. 5126 (Ont. Sup. Ct.) (QL) 

35 OBCA s.106(2)

36   The derivative action is intended to provide statutory relief from the common rule in the old English case 
of Foss v. Harbottle (1843) 67 E.R. 189 (H.L.), which provided that a shareholder of the corporation, even a 
controlling shareholder, has no personal cause of action for a wrong done to the corporation. The rule 
respects a basic principle of corporate law: a corporation has a legal existence separate from that of its 
shareholders.   See Salomon v. Salomon, [1897] A.C. 22, 66 L.J. Ch. 35 (H.L.).   A shareholder cannot be 
sued for the liabilities of the corporation and, equally, a shareholder cannot sue for the losses suffered by 
the corporation: Meditrust Healthcare Inc. v. Shoppers Drug Mart 2002 CanLII 41710 (ON C.A.), (2002), 61 O.R. (3d) 786 (C.A.)

37 OBCA s.246(1)

38 See OBCA s.246(2) and Peterson, supra note 2 at 17.35

39 2008 ONCA 111 (CanLII), paras. 26-29

40 (1984) 54 B.C.L.R. 235 (S.C.) (QL)

41 (1978), 88 D.L.R. (3d) 139 (Ont. H. C.)

42 D.H. Peterson, supra   note 4 at 17.37

43    OBCA, s.247

44 See OBCA s.247

45 See OBCA s.248

46 [1928] 4 D.L.R. 735 (Ont. C.A.)

47 [2002] O.J. No. 2528, (2002) 25 B.L.R. (3d) 1  (Ont. S.C. Sanderson J.) aff’d with minor variations

[2004] O.J. No. 1765, (2004) 44 B.L.R. (3d) 165 (Ont. C.A.)

48 (1983), 43 O.R. (2d) 128 at 137 (C.A.), leave to appeal to S.C.C. refused (1983), 2 O.A.C. 158n.

49 Sidaplex-Plastic Suppliers Inc. v. Elta Group Inc. 1995 CanLII 7419 (ON S.C.), (1995), 131 D.L.R. (4th) 399 (Ont. Ct. Gen. Div.),

50 Waxman v. Waxman [2002] O.J. No. 2528 at para. 523   (Ont. C.A.)

51 Waxman v. Waxman [2002] O.J. No. 2528 at para. 529-533   (Ont. C.A.)

52 Re Mason and Intercity Properties Ltd. (1986), 32 A.C.W.S. (2d) 366 (Ont. Div. Ct.), varied on unrelated other grounds (1987), 59 O.R. (2d) 631 (C.A.).

53 OBCA s.248(1) and (2)

54    Maple Leaf Foods Inc. v. Schneider Corp. (1998) 42 O.R. (3d) 177 (QL)

55 Brant Investments Ltd. v. KeepRite Inc.  (1991)  3O.R.  (3d)  289  (Ont.  C.A.)  (QL): BCE Inc. v.  1976 Debentureholders et al. 2008 SCC 69, [2008] 3 S.C.R. 560 at para. 71 referring to Dickerson Committee (R. W. V. Dickerson, J. L. Howard and L. Getz), Proposals for a New Business Corporations Law for Canada (1971), vol. 1, at p. 163.

56   Budd v. Gentra Inc.,  1998 CanLII  5811  (ON C.A.); Hurontario Property Development Corporation v. Pinewood Business Interiors Inc., 2010 ONSC 260 (CanLII) at para. 117

57 Malata Group (HK) Limited v. Jung, 2008 ONCA 111 (CanLII) at para. 31-32

58 Jabalee v. Abalmark Inc. [1996] O.J. No. 2609 (Ont. C.A.), the Court allowed a post-oppression company to be added as a party because the company arguably “aided and abetted” the alleged oppression.   See also Gautier v. Telerate Canada Inc., 2000 CarswellOnt 4019 and Tessaro v. DH Collins & Associates Ltd., 2009 CanLII 5125 at para. 10.

59   Ibid., paras. 34-35

60 2006 CanLII 15 (ON C.A.), (2006), 79 O.R. (3d) 81 (C.A.) paras. 111-112

61 Brant Investments Ltd. v. KeepRite Inc., supra.    See also Greenlight Capital Inc. v. Stronach, 2006 CanLII 36620 (ON S.C.), paras.   19-28

62 BCE Inc. v. 1976 Debentureholders et al. 2008 SCC 69, [2008] 3 S.C.R. 560

63   Ibid., para. 68 and see Tanenbaum v. Tanjo Investments Ltd., 2009 CanLII 48526 (ON SC) para. 46

64   Ibid at paras. 70-71

65   Ibid., para. 73 and see also, I.Ellyn, QC and M.E. Gordon, Winning Business Appeals and the Concept of Commercial Reasonableness,   http://www.hg.org/article.asp?id=4813.

66   Ibid., para.   74, referring to G. Shapira,  “Minority Shareholders’ Protection  — Recent Developments” (1982), 10 N.Z. Univ. L. Rev. 134, at pp. 138 and 145-46 and   First Edmonton Place Ltd. v. 315888 Alberta Ltd. 1988 CanLII 168 (AB Q.B.), (1988), 40 B.L.R. 28, varied 1989 CanLII 222 (AB C.A.), (1989), 45 B.L.R. 110;

67   Ibid, para. 75, referring to Re Ferguson and Imax Systems Corp. (1983) 150 D.L.R.(3d)718 (Ont CA) 68   Ibid. para. 76

69   Ibid. para.   77, referring to Alberta Treasury Branches v. SevenWay Capital Corp.  1999 ABQB  859 (CanLII), 1999 ABQB 859 (CanLII), (1999), 50 B.L.R. (2d) 294 (Alta. Q.B.), aff’d 2000 ABCA 194 (CanLII), 2000 ABCA 194 (CanLII), (2000), 8 B.L.R. (3d) 1, 2000 ABCA 194.

70   Ibid. para. 78

71 OBCA s. 248(2) 

72 Brant Investments Ltd. v. KeepRite Inc. (1991) 3O.R. (3d) 289,   1991 CanLII 2705 (ON C.A.),   SidaplexPlastic Suppliers Inc. v. Elta Group Inc. 1998 CanLII 5847 (ON C.A.), (1998) 40 O.R. (3d) 563 (Ont. C.A.); 2082825 Ontario Inc. v. Platinum Wood Finishing Inc., 2008 CanLII 48125 (ON S.C.)   at para. 27

73 OBCA s.248(3).   Not all available remedies are listed here.   The entire section may be viewed online at http://www.e-laws.gov.on.ca/DBLaws/Statutes/English/90b16_e.htm#BK269

74 OBCA s.249(4)

75 Alles v. Maurice (1992) 9 C.P.C.(3d) 42 (Ont. Gen. Div.) (QL)

76   Molinaro v.   U-Buy Discount Foods Limited   [2000] O.J. No. 4642   (Ont. Superior Court of   Justice)

77 Alizadeh v. Akhavan [2004] O.J. No. 2147   (Jarvis J.)   (Ont. Superior Court)

78 OBCA s.245

79 [1988] A.J. No. 511 (Alta. Q.B.) (QL)

80   C.C. Petroleum v. Allen et al. [2002] O.J. No. 2203 (S.C.J.) (QL)

81 Downtown Eatery (1993) Ltd. v. Ontario [2001] O.J. No. 1879 (C.A.) (QL)

82 Sidaplex-Plastic Suppliers Inc. v. Elta Group Inc. 1998 CanLII 5847 (ONCA), (1998) 40 OR(3d) 563

83 Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, section 4.     Under s. 16(1)(a), there is no limitation period for  “a proceeding for a declaration  if no consequential relief is sought”.    Typically, a claim for oppression or derivative seeks consequential relief so the section may not be applicable.   A claim for a declaration that property is held on constructive trust may not be subject to the limitation period.    The specific facts of each case must be carefully examined.

84   Reinhart v. VIXS Systems Inc., 2011 ONSC 5349 (CanLII) para. 2.    See also:   Joseph v. Paramount Canada's Wonderland, 2008 ONCA 469 and Paragon Development Corp. v. Sonka Properties Inc. 2009 CanLII 13627 (ON SC).

85   The first version of this paper expressed the view that there were no limitation periods applicable to oppression claims.    This view was judicially expressed by the Ontario Court of Appeal in Waxman v. Waxman,  2004  CanLII  39040  (ON  C.A.) para.  534-535  in  reference  to  oppression  under  the  Canada Business Corporations Act.    However, it is now considered well-settled that the Ontario Limitations Act applies to oppression claims under the OBCA. The circumstances may be different in other provinces.   See f.n. 3 at p. 3 for the practice in British Columbia and Jaska v. Jaska 1996 CanLII 2926 (MB C.A.), (1996), 141 D.L.R. (4th) 385 (Man. C.A.) for the practice in Manitoba.

86 2006 CanLII 15 (ON C.A.)

87 Ibid., para. 169-170, Ont. C.A.

88 Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, section 4.

89 Ford Motor Company of Canada, Ltd. v. Ontario Municipal Employees Retirement Board, 2006 CanLII 15 (ON C.A.), para. 174.     In British Columbia, the provincial limitation period of six years is likely applicable: see see S. Antle, S. Warnett and J. T. Li, And Now for Something Slightly Different: The British Columbia Oppression Remedy, posted March 2, 2007, pag 3, f.n. 7 above.

90    (1992) 98 D.L.R. (4th) 509 (Ont. Gen. Div.) (QL)

91 OBCA s.161(1)

92 OBCA s.161(5)

93 OBCA s.161(6)

94 OBCA s.162(1)

95 OBCA s.162(1)(a).

96 Re Royal Trustco Ltd. (No.3) (1981) 14 B.L.R. 307 (Ont. S.C.) (QL)

97 OBCA s.185(1)

98 OBCA s.188(1)

99 OBCA s.189(1)

100 (1980) 13 B.L.R. 135 (Que. S.C.); aff'd138 D.L.R.(3d) 521

101 (1980) 13 B.L.R. 135 (Que. S.C.); aff'd138 D.L.R.(3d) 521

102 Ziegel, supra   f.n. 3 at 1290

103 OBCA s.207(1)

104 OBCA s.207(b)(iv)

105 OBCA s.207(2)

106 Peterson, supra   note 4 at 20.36.   See also Giannotti v. Wellington Enterprises Ltd. [1997] O.J. No. 574 (Ont. Gen. Div.) (QL), where the corporation was wound up because the company had no reason to exist once its assets were distributed.

107 Ebrahimi v. Westbourne Galleries Ltd. [1972] 2 All E.R. 492 (H.L.) 

Other Legal Publications from Igor Ellyn
The Standard of Appellate Review: High Hurdles to Right Wrongs
Enforcement of Foreign Judgments in Ontario, Canada
Shareholders Remedies in Canada 2012
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