Oppression remedy Flashcards
Statutory basis
s241
s238 - def of complainant
The oppression remedy in Canada is “the broadest, most comprehensive and most open-ended shareholder remedy in the common law world.”
This is an equitable proceeding, and the court has broad discretion to fashion a remedy: see CBCA § 241(3)
Oppression cause of action should not be used instead of contract cause of action to collect on a debt. [First Edmonton]
Elements of an oppression cause of action
1）The reasonable expectations of a complainant have been violated
2）By acts or omissions of the corporation, its affiliates or directors that effect a result that
3）Is oppressive, unfairly prejudicial or unfairly disregards the complainants’ interests
4）Causing
5）Compensable injury.
Oppression and derivative causes of action: procedural
Oppression:
- No requirement to get leave of court to proceed
- No supervision by the court in the proceeding
- Damage goes to the complainant, where as for Derivative action, damages go to the corp
Both require the court to approve the settlement or discontinuance - s242(2)
Oppression and derivative causes of action: substantive
The cause of action for derivative action is s122
- If the claim is for breach of duty of loyalty, a finding of GF and in the best interest of corp will NOT preclude a claim of oppression;
- If the claim is for breach of duty of care, a finding that BJR applies means court will not intervene and that there can be no oppression remedy - WHY?
Who can sue?
s238
Oppression cause of action: protecting minority SH
In US, minority SH are protected by the doctrine that majority SH owe FD to minority.
In Canada, allow minority Sh to use oppression as a cause of action.
- The action could be in the best interest of the corp, but still violates SH’s reasonable exp. and oppressive.
- Usually happens when minority SH are being squeezed out.
BCE
Facts: Proposed LBO of BCE by OTPP could add 30b to the debt of Bell Canada. Bondholders bring action against BCE. BCE sought to use s192 - plan of arrangement to get court approval of the transaction.
para 17: Amalgamation can be arranged in a way that would not trigger the voting rights of bondholders - not oppressive due to the doctrine of independent legal significance: in corp law, courts will not evaluate the fairness if proper procedure was followed.
Court then reviewed three [four] ways to challenge this transaction.
1) derivative action for breach of duty of loyalty
2) breach of duty of care under tort law
3) oppression
4) potential to claim a plan of arrangement under s192 was unfair
For Oppression:
- Two-step - para 56
- Circumstances that create the reasonable expectations - para 72-84
Outcome: no oppression remedy
Plan of arrangement
s192 - often used to arrange an acquisition or merger, in addition to any SH voting req.
- Benefit is that corp can do everything in one procedure instead of a series of transactions.
- Also lends certainty: if approved by court, normally would preempts action for oppression. - NOT HERE
Downtown Eatery v Ontario
Facts: corporate reorganization of two sister companies had the effect of rendering one company without assets such that an employee claiming wrongful dismissal, first, and then oppression as a judgment creditor in a second action was unable to have judgment satisfied.
Court: even though reorganization was done in GF, employees were successful in oppression b/c the effect of reorganization was unfair to the complainant.
First Edmonton Place Ltd. V. 315888 Alberta
Facts: LL gave package of inducement for renting the place - 18m free rent and $140k; tenant stayed for 18m then left, LL bring action for oppression and derivative action.
Williams: court here seemed to have confused the question of who is a proper complainant with the question of whether the complainant is likely to succeed.
