Statutory Remedies for Shareholders: The Oppression Remedy

Ontario and federal legislation impose a responsibility on corporations to act in a manner that does not negatively affect the legitimate and reasonable expectations of shareholders and other stakeholders. If a corporation fails to act in such a manner, shareholders and relevant stakeholders may be entitled to relief from the corporation’s conduct.

The corporate litigation lawyers at Walker Law regularly assist clients with pursuing oppression remedy claims. To help you understand whether you can utilize the oppression remedy, we explain the purpose of the oppression remedy and the legal test to meet, below.

What is the Oppression Remedy and its Purpose?

The oppression remedy is provided under the Ontario Business Corporation Act (the “OBCA) and the Canada Business Corporation Act (the “CBCA”). Depending on where subject corporation was incorporated, the OBCA or the CBCA will apply.  At its core, the oppression remedy provides a “complainant” with a mechanism to protect their “interests”.

Some preliminary definitions are important to understand the oppression remedy clearly:

  • “Complainant” – is defined as a “stakeholder”. This includes but is not limited to shareholders, directors and officers of the corporation, and employees. The list of who can be considered a “complainant” for the purposes of the oppression remedy is not closed.
  • “Interests” – Courts have interpreted the word “interests” to broadly mean the reasonable expectations of a stakeholder, such as a shareholder.[1] It is important to note that the conduct complained of does not need to be illegal to qualify as oppression. However, not every breach of an expectation qualifies as oppression.
  • “Unfairly disregarded, prejudiced., or oppressive” – What a Court considers as unfairly disregarded, prejudice and/or oppressive depends on the circumstances. If the behaviour violates a shareholder’s reasonable expectations, the conduct may be considered as unfairly disregarding, prejudicial and/or oppressive. “Oppression” carries the sense of conduct that is coercive and abusive, and suggests bad faith. “Unfair prejudice” may admit of a less culpable state of mind, that nevertheless has unfair consequences. “Unfair disregard” of interests extends the remedy to ignoring an interest as being of no importance, contrary to the stakeholders’ reasonable expectations.[2]

Why Pursue the Oppression Remedy?

The oppression remedy provides the court with a broad jurisdiction to enforce not just what is legal but what is fair. Courts have noted that oppressive conduct may occur in, but is not limited to:

  • transactions involving shareholder loans;
  • transactions involving the use of corporation funds for direction / officer personal use;
  • mishandling funds, for example the payment of excessive management fees; and/or
  • transfer of corporate opportunities to other companies or individuals.[3]

Speak with a business dispute lawyer at Walker Law to see whether your situation constitutes oppressive conduct.

The remedy is usually pursued against the subject corporation. However, directors and officers can also be held to be personally responsible in relation to an oppression remedy lawsuit. As mentioned above, the intention is to remedy and uphold the shareholders’ reasonable expectations. Pursuant to the OBCA and the CBCA, Courts can make any interim or final order it thinks fit, including restraining the oppressive conduct that a shareholder complains of, payment of damages to the shareholder, removal, or replacement of directors etc.

Do you meet the test for oppression?

The legal test was outlined by the Supreme Court of Canada to determine whether an oppression remedy claim will succeed. In essence, as a shareholder you must establish:

  1. there is a breach of a “reasonable expectation” that you held as a shareholder of a corporation; and
  2. the conduct that you are complaining of amounts to unfair disregard, unfair prejudice and/or oppression.[4]

It is not sufficient to just have an expectation. Courts will question whether the expectation is “reasonable” having regard to the facts of the specific matter, the relationships at issue, and the entire context, including the fact that there may be conflicting claims and expectations.[5] The reasonable expectation is the cornerstone of the oppression remedy claim. The breach of that reasonable expectation then also needs to be assessed based on the context of the situation. What is considered oppressive, unfairly prejudicial or unfair disregard in one situation may not be in another.[6]  As the oppression remedy test is very fact specific, we recommend that you consult the commercial litigation lawyers at Walker Law to assist you with assessing your case.

[1] Cormpilas v. 1490565 Ontario Limited, 2022 ONSC 119 (CanLII), at para 429

[2] 1417217 Ontario Inc. v. River Trail Estates Inc., 2021 ONSC 4785 (CanLII), at para 177

[3] 1417217 Ontario Inc. v. River Trail Estates Inc., 2021 ONSC 4785 (CanLII), at para 178

[4] BCE Inc. v. 1976 Debentureholders, 2008 SCC 69 (CanLII), [2008] 3 SCR 560, at para 56

[5] BCE Inc. v. 1976 Debentureholders, 2008 SCC 69 (CanLII), [2008] 3 SCR 560, at para 62

[6] BCE Inc. v. 1976 Debentureholders, 2008 SCC 69 (CanLII), [2008] 3 SCR 560, at para 59

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