Canada: Restarting The Clock: Court Of Appeal Affirms Two-Year Limitation Period For Oppression Remedy Cases

In its recent decision in Maurice v. Alles, the Court of Appeal for Ontario held that oppression remedy claims under the Ontario Business Corporations Act (OBCA) must be commenced within the general two-year limitation period prescribed by section 4 of the Limitations Act, 2002. However, the court held that when a party engages in conduct that is in furtherance of or based upon earlier oppressive conduct, this is a new cause of action because it is new oppressive conduct.

The decision confirms that judges do not have remedial discretion to permit a statutory oppression claim commenced more than two years after it is discovered to proceed on the basis that there is an "ongoing fact situation" of continuing oppressive conduct. Rather, discrete further oppressive conduct must occur within the applicable limitation period.

BACKGROUND

The appellant and the individual respondents were equal shareholders in Kirby-Maurice Company Limited (Kirby-Maurice), which owned shares in an appliance store, Television Antenna & Service Co. (Tasco), as well as another corporation, Marlba Investments Limited (Marlba). The appellant sold his own shares in Tasco and Marlba in 2007, but remained a shareholder and director of Kirby-Maurice.

In July 2008, the appellant was given notice of a shareholders' meeting of Kirby-Maurice to discuss the sale of shares of Tasco and Marlba to a third party, including the sale by Kirby-Maurice of some of its shares in Tasco and Marlba. At a meeting held on July 25, 2008, the appellant was informed by the individual respondents that they had sold their shares in Tasco and Marlba.

The appellant opposed the sale without a formal valuation of the shares. He took the position that the respondents had breached Kirby-Maurice's unanimous shareholders agreement by not having unanimous consent of all shareholders of Kirby-Maurice. The appellant continued to request information on the valuation of his shares in Kirby-Maurice and how Kirby-Maurice's shares in Tasco were valued for the purposes of sale but took no steps to commence an oppression claim.

In 2013, the individual respondents brought an application for the appointment of a valuator to value the issued and outstanding shares of Kirby-Maurice. In response, the appellant commenced a cross-application seeking, in part, relief under the oppression remedy of the OBCA.

On a motion for summary judgment, the motion judge held that the appellant's cross-application was statute-barred by the two-year limitation period under section 4 of Ontario's Limitations Act, 2002.

COURT OF APPEAL DECISION

In reversing the motion judge's decision, the Court of Appeal affirmed that the oppression remedy is subject to the general two-year limitation period under section 4 of the Limitations Act, 2002, and that no exceptions or special circumstances were available to extend the limitation period. The court held that the respondents' continuing refusal to produce documents did not constitute ongoing oppressive conduct and that "[c]ourts must be careful not to convert singular oppressive acts into ongoing oppression claims in an effort to extend limitation periods."

The court stated that by July 2008 the appellant had sufficient knowledge to bring forth an oppression claim, but took no steps within two years to commence one. Accordingly, his oppression claim based on the actions of the respondents from July 2008 was out of time.

However, the Court of Appeal held that the motion judge erred by not recognizing a discrete, potentially oppressive act occurred when the individual respondents brought an application for the appointment of a valuator to value the issued and outstanding shares of Kirby-Maurice in 2013. According to the court, the individual respondents "were in effect seeking a valuation process and payout to the appellant that did not take into account their earlier alleged oppressive conduct." The court held that it "must have regard to the remedial nature of the oppression remedy and the fact that any threatened or actual conduct that is oppressive, or unfairly prejudicial to, or unfairly disregards the interests of any complainant can constitute a discrete claim of oppression."

The Court of Appeal directed the parties to proceed to a trial on the allegation that the share sale transaction executed by the respondents was oppressive, or unfairly prejudicial, or unfairly disregarded the appellant's interest in getting fair value for his shares in Kirby-Maurice.

In addition to its holding regarding the oppression remedy, the Court of Appeal also held that a motion for summary judgment under Rule 20 of Ontario's Rules of Civil Procedure is not available in the context of an application. However, since neither party objected to the use of the summary judgment procedure and participated in the motion, the Court of Appeal did not interfere with the motion judge's decision on this procedural basis.

IMPLICATIONS

Subject to any further appeal, the Alles case serves to limit the remedial discretion of judges to permit an oppression remedy claim commenced more than two years after its discovery, while also leaving it open to judges to determine that conduct that is in furtherance of or based upon earlier oppressive conduct is a new cause of action because it is new oppressive conduct.

As the law stands in Ontario, a party that commences an oppression claim more than two years after the original oppressive conduct is discovered will have to demonstrate new oppressive conduct within the applicable limitation period.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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