Canada: The Intersection Between Form And Substance In Corporate Law

Last Updated: December 14 2016
Article by Scott McGrath and Kenneth Prehogan

In its recent decision in Mennillo v. Intramodal inc., 2016 SCC 51 ("Mennillo"), the Supreme Court of Canada addressed, for the first time since 2008, the oppression remedy. At issue was whether a corporation's failure to comply with the strict requirements of the Canada Business Corporations Act (the "CBCA") in completing a share transfer was oppressive, even though the share transfer was agreed to and directed by the company's shareholders and directors.

The majority of the Court, in reasons for judgment penned by Cromwell J., found that the intention to transfer the shares effectively trumped any deficiencies in carrying out that intention. There was a strong dissent, however, written by Côté J., who made an impassioned plea that courts not ignore statutory requirements or reward parties who do so.

The Facts

The Respondent corporation, Intramodal inc., was incorporated on July 13, 2004. Two friends, Johnny Mennillo and Mario Rosati, were its only directors and officers. Mr. Rosati was issued 51 shares and Mr. Mennillo was issued 49.

On May 25, 2005, Mr. Mennillo sent a letter to Intramodal resigning as director and officer of the company. Intramodal argued at trial that this resignation also included Mr. Mennillo's status as a shareholder of the company. It argued that he decided to transfer his shares to Mr. Rosati because he refused to be liable for Intramodal's liabilities. Mr. Mennillo argued that he meant only to resign as a director and officer (which is indeed what his letter said), and not to relinquish his shares in the company.

On July 18, 2005, Intramodal's lawyer filed an amending declaration to indicate that Mr. Mennillo had been removed as a director and shareholder of the company. This was not done in accordance with the requirements of the CBCA.

Mr. Mennillo advanced $440,000 to Intramodal over the next two years. Messrs. Mennillo and Rosati met twice in July, 2007, although their stories differed over what happened at those meetings. By this time, Intramodal was a successful and profitable company. Mr. Mennillo gave evidence that he was unhappy that he was not sharing in the company's profits. He also said that he rejected an offer at that time to transfer his shares to Mr. Rosati.

For his part, Mr. Rosati claimed that Mr. Mennillo was unhappy at the lack of return on his $440,000 loan to Intramodal.

Between July 2006 and December 2009, Mr. Mennillo was paid $690,000 by Intramodal. On December 7, 2009, Mr. Rosati gave Mr. Mennillo a cheque for $40,000 marked "Full and Final payment". According to Mr. Mennillo, that was the first time that he understood that he was no longer a shareholder of Intramodal. His lawyer sent a letter to Intramodal claiming that he had been unduly and wrongfully stripped of his status as a shareholder of the corporation. He applied for an oppression remedy against Intramodal on September 7, 2010.

Can One Reasonably Expect a Corporation to Comply with Corporate Statutes?

In the Court's first opportunity to squarely address the oppression remedy since its decision in BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, all nine justices affirmed the legal test contained in that decision. There are two elements that must be satisfied by an Applicant. First, he or she must "identify the expectations that he or she claims have been violated ... and establish that the expectations were reasonably held" and then must show that those reasonable expectations were violated by conduct that was oppressive, unfairly prejudicial to or unfairly disregarded the interests of any security holder.

The difference between the majority and minority judgments was not in the formulation of this legal test, but rather in its application.

Justice Cromwell reasoned that because it was Mr. Mennillo's intention that he transfer his shares in 2005, he could not reasonably have expected that he would continue to be treated as a shareholder. He found that the failure to properly remove Mr. Mennillo as a shareholder in accordance with his express wishes did not make it just and equitable for Mr. Mennillo to regain his status as a shareholder.

In her dissent, Justice Côté found that the acts of non-compliance with the CBCA were themselves evidence that satisfactorily established oppression against Mr. Mennillo. She found that Mr. Mennillo could have reasonably expected Intramodal to conduct itself in accordance with the provisions of the CBCA. By registering a transfer of Mr. Mennillo's shares without meeting the statutory prerequisites for doing so, it acted in a manner that unfairly prejudiced Mr. Mennillo.

Concurring Judgment Simplifies the Court's Message

Justices Cromwell and Côté were not the only judges to pen an opinion in this case. The Chief Justice, joined by Moldaver J., wrote a separate, concurring judgment. Of the 263-paragraph decision, the Chief Justice required only eight. She succinctly wrote:

Having asked to be removed as a shareholder, Mr. Mennillo had no reasonable expectation that he would remain on the books as a shareholder. ... Mr. Mennillo has failed to establish a reasonable expectation that he would remain a shareholder in Intramodal inc. It follows that his action for oppression must fail.

Cutting through all of the evidentiary and legal land mines that arose in this case, the Chief Justice articulated the heart of the majority's reasoning, and reaffirmed the applicable test in an oppression remedy case: reasonable expectations rule.

A party will not be allowed to take advantage of mistakes, corporate sloppiness, or non-compliance with corporate statutes pursuant to the oppression remedy if to do so would bestow on it an advantage or benefit that it could not have reasonably expected. A breach of a corporate statute will not necessarily establish oppression.

Implications for Future Cases

Justice Côté was concerned that if Intramodal inc. was permitted to avoid consequences for its failure to comply with the CBCA when making the share transfer, that it would encourage other corporations to ignore their corporate obligations as well. But corporations would be foolhardy to take such a lesson from this case. If anything, it highlights the confusion, chaos and exposure that are bestowed on a corporation when it fails to comply with its statutory obligations. If Intramodal had simply complied with the CBCA when establishing the share transfer, there would be no argument and a six-year legal odyssey to the Supreme Court of Canada would have been avoided.

Corporations are best-served by having qualified corporate counsel acting on their behalf to ensure that statutory obligations are fully complied with, in the hopes that litigation can be avoided.

If your corporation develops a dispute with a stakeholder, or if you believe that you may have a claim for oppression against a corporation, you would be best served to contact litigation counsel as soon as possible. If you have any questions about your rights or best practices, please contact the authors and we would be happy to assist you.

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.

Scott McGrath
Kenneth Prehogan
Events from this Firm
6 Sep 2017, Conference, Toronto, Canada

WeirFoulds partners Brad McLellan and David Thompson will participate in the 2017 Canadian Apartment Investment Conference.

13 Sep 2017, Conference, Denver, United States

WeirFoulds Partners Debbie Tarshis, Raj Anand, Jill Dougherty, Jordan Glick and Alexandra Wilbee including Associates Priya Morley and Lara Kinkartz will be speaking at the 2017 CLEAR Annual Educational Conference in Denver, Colorado.

15 Sep 2017, Conference, Saint John, Canada

WeirFoulds partner Edmond Lamek will speak at the Canadian Bar Association's 13th National Insolvency Conference. Edmond will be a part of a discussion on hot topics impacting the practice of commercial and personal insolvency.

In association with
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.