As we have discussed before, the
oppression remedy is a potentially powerful tool, which can be
used in a range of circumstances by a variety of corporate
stakeholders, including shareholders, directors and officers, and
secured and unsecured creditors.
While the oppression remedy is usually understood as and is
typically used for protecting a corporation's minority
shareholders, section 241 of the Ontario Business Corporations
Act permits that a "complainant" can include
"any other person who, in the discretion of the court, is a
proper person to make an application" to commence an
Section 241 has been interpreted to include creditors, where a
creditor demonstrates that it had a reasonable expectation of being
treated fairly which was violated by corporate actions that were
oppressive to the creditor's interest.
Key to a creditor's assertion of a claim for oppression is
its expectations of its relationship with the corporation.
Determining whether a creditor had a "reasonable
expectation" of fairness requires a fact-based inquiry, with
consideration given to the relationship between the parties and
general commercial practice.
Once the creditor has established a reasonable expectation of
fairness, it must demonstrate that the corporation's failure to
meet this expectation caused detrimental consequences that amount
to "oppression," "unfair prejudice," or
"unfair disregard" of its interest.
In the case of Sidaplex-Plastic Supplies Inc. v. Elta Group
Inc., a creditor brought a successful claim for oppression
against a corporation arising from a personal guarantee given to it
by the corporation's principal (the corporation's sole
director and shareholder). In that case, the creditor used a
reasonable expectations analysis to persuade the court that its
interests had been unfairly prejudiced or unfairly disregarded when
the principal had let the guarantee lapse.
Not all harmful conduct, however, will give rise to a remedy. As
the Supreme Court held in BCE Inc. v. 1976
Debentureholders, the creditor must prove that the impugned
conduct was the legal cause of the alleged harm. In that case, a
group of investors that held a series of debentures issued by an
affiliate of BCE objected to a leveraged buyout of the company,
arguing that BCE's failure to protect the value of their
debentures during the buyout constituted oppressive conduct.
Although the Supreme Court found that BCE was required to take its
creditors' interests into account and that the creditors had
standing to assert a claim in oppression, the claim ultimately
failed on the issue of causation.
It's not often that our little blog intersects with such titanic struggles as the U.S. presidential race – and by using the term "titanic" I certainly don't mean to suggest that anything disastrous is in the future.
J.J. v. C.C., is an interesting case in which the court held that an automotive garage owes a duty to minor children to secure the vehicles on the premises by locking the cars and safely storing the car keys...
In Irwin v. Alberta Veterinary Medical Association, 2015 ABCA 396, the Alberta Court of Appeal found that the "ABVMA" failed to afford procedural fairness to a veterinarian undergoing an incapacity assessment.
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