Canada: "Sloppy Paperwork" Does Not An Oppression Claim Make

Last Updated: November 24 2016
Article by Marco P. Falco

For decades, Canadian Courts have used the oppression remedy to give effect to the reasonable expectations of shareholders in commercial disputes. Since the Supreme Court of Canada's 2008 decision BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, the Courts have maintained that an oppression claim will only be successful where the stakeholders' expectations have been violated in a way that is unfair or prejudicial.

The Supreme Court of Canada has reaffirmed this theme in a recent decision, Mennillo v. Intramodal Inc., 2016 SCC 51, per Cromwell J.

In Mennillo, the question was whether the parties' failure to comply with the legal formalities of the Canada Business Corporations Act, R.S.C. 1985, c.C-44 (the "CBCA") during a share transfer could amount to oppression.

The majority of the Court held that it could not.

Particularly with respect to smaller, closely-knit corporations that do not follow ordinary legal and commercial practices, the Court held that so long as the shareholders' reasonable expectations have been honoured, the corporation's failure to abide by the technical requirements of the CBCA will not amount to oppression.


The dispute in Mennillo arose out of a road transportation company incorporated by Johnny Mennillo ("Mennillo") and Mario Rosati ("Rosati") named Intramodal. Mennillo agreed to contribute money to Intramodal, while Rosati would contribute his skills. 51 class "A" shares were issued to Rosati and 49 class "A" shares were issued to Mennillo. The notices of subscription and resolution issuing these shares was signed by Rosati alone.

Throughout their business dealings, the parties did not comply with the formal requirements of the CBCA and rarely put anything in writing. There was no shareholders' or partnership agreement. As the Court noted, the parties frequently agreed on matters "by a simple handshake".

The monies Mennillo advanced to Rosati were not governed by a written contract. In fact, the only evidence of the money given to Intramodal by Mennillo were two Rolodex sheets initialed by Rosati.

By 2005, Mennillo no longer wanted to remain a shareholder of Intramodel as he did not want to guarantee all of the company's debts. Accordingly, he sent a letter to Rosati in which he stated that he was resigning as an officer and director of the company. Mennillo argued that he always intended to continue being a shareholder of Intramodal. Rosati argued that, at this point in time, Mennillo transferred his shares to Rosati and had no intention of being a shareholder.

In July, 2005, Intramodal's lawyers filed an amending declaration stating that Mennillo had been removed as a director and shareholder of the company. Afterward, Mennillo continued to advance monies to Rosati.

Shortly thereafter, Menillo learned that Intramodal and Rosati were becoming evermore financially successful. By 2007, Mennillo demanded that his loans be repaid and that he receive his share of Intramodal's profits. At that time, he rejected an offer to transfer his shares to Rosati.

Following negotiation, the money Mennillo advanced to Rosati was repaid. According to Mennillo, it was only upon receiving a final payment for the loans from Rosati that he realized he was no longer a shareholder of Intramodal.

Mennillo then brought an oppres-sion action against Intramodal and Rosati alleging that Rosati had wrongfully stripped him of his status as a shareholder.

As part of his oppression claim, Mennillo argued that Intramodal's lawyer had failed to comply with certain corporate formalities under the CBCA when he removed Mennillo as a shareholder. Mennillo argued that such conduct was oppressive.

The trial judge dismissed the oppression claim. The trial judge held that Mennillo agreed that he would only remain a shareholder for as long as he personally guaranteed Intramodal's debts. Since Mennillo no longer wanted to offer such a guarantee, he transferred his shares to Rosati. According to the trial judge, the company's failure to comply with the necessary formalities to effect the share transfer was a mere "oversight" on the part of Rosati's lawyer. Such conduct did not amount to oppression. The Québec Court of Appeal affirmed the trial judge's ruling.

On appeal to the Supreme Court of Canada, the Court upheld the trial judge's ruling. In so doing, the Court affirmed that the failure by the company to comply with the formalities of the CBCA in effecting the share transfer did not amount to oppressive conduct.

Mennillo's reasonable expectations had been fulfilled—since he no longer wanted to guarantee the company's debts, he was removed as a shareholder. The fact that the share transfer was effected by "sloppy paperwork" on the part of Rosati's lawyer was irrelevant to the oppression claim.

What Are the Requirements of an Oppression Claim?

Citing its earlier decision in BCE Inc. v. 1976 Debenture Holders, the majority of the Court affirmed the two elements of an oppression claim. First, the claimant must "identify the expectations that he or she claims have been violated... and establish that the expectations were reasonably held". Once this requirement has been met, the claimant must then show that these reasonable expectations were violated by conduct that was "oppressive, unfairly prejudicial to or unfairly disregarding of the interests of any security holder".

Oppression is Concerned With Business Realities, Not Narrow Legalities

In relying on the BCE Inc. decision, the Court noted that the issue of whether an oppression claim has been made out depends largely on "business realities", not "narrow legalities". That is, the Courts will consider the oppression claim in context, assessing the parties' reasonable expectations based on the nature of the relationship between the parties and how they conducted business. As an equitable remedy, oppression is largely fact-dependent.

Failure to Comply With CBCA Formalities Did Not Amount to Oppression

In Mennillo, the parties rarely transacted their business on paper or pursuant to the CBCA. The Court characterized the lawyer's share transfer from Mennillo to Rosati as "sloppy paperwork". That is, the parties did not specifically comply with section 76(1) of the CBCA to effect the share transfer, amongst other errors. Section 76(1) of the CBCA requires that Mennillo endorse the share transfer, which he did not.

According to the Court, while this conduct did formally comply with the requirements of the CBCA, it could not amount to oppression. The parties' relationship had long been characterized by informality. The parties' expectations were that if Mennillo did not want to guarantee the corporation's debts, he would no longer be a shareholder. The Court held:

It is uncontested that Intramodal did not ascertain whether some of the corporate formalities of the CBCA were complied with by Mr. Mennillo and Mr. Rosati when it registered the transfer of shares, but that cannot in and of itself invalidate any transfer between them...


In this case, the requirements of s.76(1)(a) [of the] CBCA are not fulfilled. It is common ground that the shares that were transferred were not endorsed by Mr. Mennillo...Intramodal proceeded to register a transfer that did not meet all the criteria in the CBCA. But this is of no assistance to Mr. Mennillo under the circumstances. It is not as a result of an improper registration of this share transfer that Mr. Mennillo is no longer the holder of any shares in Intramodal...[emphasis added]

Oppression: A Contextual Remedy

The Court's analysis in Mennillo emphasizes a few themes:

  1. Oppression claims will always be assessed in context. When determining the claimants' "reasonable expectations", the Court will look to how the parties conducted themselves throughout the commercial relationship.
  2. Commercial reality is essential to an oppression claim. Canadian courts will assess oppression claims through the lens of "business realities", not legal formalities. A failure to comply with a governing statute or common law requirements is not necessarily fatal to an oppression claim. Everything depends on the business context in which the oppression claim is asserted.
  3. The conduct must be oppressive. A mere failure to comply with a statute is not oppressive if the claimant cannot show real prejudice or unfair disregard for the claimant's interests.

All in all, the Mennillo decision reaffirms the nature of oppression as an equitable commercial remedy. The success of an oppression claim depends largely on its facts. What amounts to oppression in one case may not in another. The crux of an oppression claim is the violation of a shareholder's reasonable expectations in a way that is prejudicial or unfair to the shareholder. Anything else is a mere irregularity.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Marco P. Falco
Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions