The remedies available to stakeholders in corporate disputes for oppression are some of the most flexible remedies available at law. Under Alberta’s Business Corporations Act (the “ABCA”), the Court may rectify any act or omission of a corporation, its affiliates, or its directors that results in conduct that is oppressive, or conduct that is unfairly prejudicial to, or that unfairly disregards the interests of, any security holder, creditor, director or officer. The powers of the Court in these circumstances include, but are not limited to, replacing directors, ordering the purchase of shares, compensation, or liquidation/dissolution of the corporation.
To access this broad remedy, the Supreme Court of Canada (“SCC”) ruled in the seminal 2008 decision of BCE Inc v 1976 Debentureholders (“BCE”), and restated more recently in the 2017 Wilson v Alharayeri decision,that in order to be entitled to remedies from oppression, the complainant (i.e. the party bringing the action against a corporation) must establish that: (1) the complainant had reasonable expectations regarding the complainant’s treatment by the corporation or its representatives; and (2) that those reasonable expectations were violated by conduct that was oppressive or unfairly prejudicial or unfairly disregarded the complainant’s interests.
The reasonable expectations of the complainant are foundational to a claim for relief from oppression. Reasonable expectations will always be fact-specific, contextual (for example, expectations may differ for a shareholder of a profitable corporation, as opposed to one on the “eve of bankruptcy”) and must be objectively reasonable. The Courts have also held that in determining whether oppression has occurred, one should look beyond strict legal rights and instead to the relationship between the parties; whether an expectation is reasonable ought to be assessed on all the words and deeds of the parties and “not necessarily only those confined to paper, and not necessarily only those made when the relationship first arose.” (Westfair Foods Ltd v Watt 1991 ABCA).
However, the SCC ruled in BCE that:
The actual expectation of a particular [complainant] is not conclusive. In the context of whether it would be “just and equitable” to grant a remedy, the question is whether the expectation is reasonable having regard to the facts of the specific case, the relationships at issue, and the entire context, including the fact that there may be conflicting claims and expectations.… Fair treatment – the central theme running through the oppression jurisprudence – is most fundamentally what stakeholders are entitled to “reasonably expect.”
(BCE, paragraphs 62-64).
In other words, while one must consider all the facts and context, the actual expectation is not conclusive, the central issue is whether the expectation was “reasonable”—after all, fairness is a two-way street.
Further, not all shareholders are equal. When considering the reasonable expectations of a minority shareholder, for example, the Courts in Ontario and Alberta have ruled that minority voting shareholders’ reasonable expectations may be far more limited than a majority voting shareholder with the votes to control the Board of Directors, and therefore the corporation itself. In deciding whether an expectation is reasonable, the Courts have ruled that it is the complainant’s job to convince the Court that their expectations were reasonable, and often turn to this non-exhaustive list of factors when assessing the claims of a complainant:
- General commercial practice;
- Nature of the corporation;
- Relationship between the parties;
- Past practices;
- Steps the claimant could have taken to protect itself;
- Representations and agreements; and
- Fair resolution of conflicting interests between corporate stakeholders.
The Courts in Alberta have ruled that there are limits to oppression claims; not every expectation, even if reasonably held, will give rise to a remedy in a claim of oppression because there must be some wrongful conduct, causation and compensable injury in the claim. If you have questions or concerns about your rights, obligations, or expectations as a shareholder, director, or officer in a corporation, and whether you have a claim for a remedy from oppression, please contact McCuaig Desrochers LLP’s Business Law Practice Group for guidance and assistance.
This article was written by Jeff Arsenault, a lawyer at McCuaig Desrochers LLP, and Olivia Wang, a student-at-law at McCuaig Desrochers LLP.
©2022 McCuaig Desrochers LLP. All rights reserved. The content of this newsletter is intended to provide general information on McCuaig Desrochers LLP, our lawyers, and recent developments in the law and is not to be relied on as legal advice or opinion.