Canada: Business Realities v. Narrow Legalities: The Supreme Court Considers The Oppression Remedy In Mennillo v. Intramodal Inc., 2016 SCC 51

In Mennillo v. Intramodal Inc. 2016 SCC 51, the most recent consideration of the oppression remedy by the Supreme Court of Canada (released on November 18, 2016), the majority confirmed the oppression remedy's equitable purpose, and held that a corporation's failure to comply with the CBCA1 does not, on its own, constitute oppression.

This decision, with particular applicability to small, closely held corporations, reiterated oppression remedy principles set out in the 2008 Supreme Court decision of BCE Inc. v. 1976 Debentureholders,2 that the remedy is concerned with fairness and business realities, rather than narrow legalities.3


In 2004, two friends, Mr. Mennillo and Mr. Rosati, formed an agreement to create a transportation company called "Intramodal". Mennillo agreed to contribute money to start the business, and Rosati brought skills to ensure its success. From the start, the dealings of the parties were "marked by extreme informality"4, where the corporation rarely complied with the CBCA and the parties "almost never put anything in writing". For example, on incorporation in July 2004, Rosati and Mennillo were issued 51 and 49 class "A" shares respectively, though the notices of subscription and the resolution were signed solely by Rosati, neither party paid for his shares (contrary to s. 25(3) of the CBCA), and Mennillo's share certificate was not signed (contrary to s. 49(4)(a) of the CBCA).5

In May 2005, Mennillo sent a letter to Intramodal indicating his resignation as an officer and director of the company. Following this, Intramodal's lawyer filed an amending declaration with the Registraire des entreprises (REQ) to indicate that Mennillo had been removed as a director and shareholder of the company.

In the early stages of the company's development, Mennillo advanced $440,000 to Rosati (not Intramodal) for the purposes of financing the business. In July 2007, Mennillo expressed discontent that he had not received any return on his investment, despite the company's success, and asked that his loan be repaid. Rosati agreed to repay Mennillo the loan plus an additional $150,000, totalling $690,000. It was only after receiving his final payment that Mennillo realized that he was no longer a shareholder of the corporation. At that time, in December 2009, Mennillo applied for an oppression remedy against Intramodal on the basis that Intramodal and Rosati had unduly and wrongfully stripped him of his status as a shareholder of the corporation.

The question before the Court

In a trial that hung on the credibility of the witnesses due to the significant lack of documentation, the trial judge found that Mennillo refused to participate in the venture, and when Mennillo asked to be removed as a shareholder and director of Intramodal in May 2005, he became a lender to Rosati, as a friend, only. Given this key finding, the trial judge found that Mennillo's oppression claim must fail. The trial judgment was upheld by the Court of Appeal for Québec.

Writing for the majority, Justice Cromwell (Abella, Karakatsanis, Wagner, Gascon and Brown JJ. concurring) set out the main question to be decided as whether the trial judge made a reviewable error in finding that in May 2005, Mennillo no longer wished to remain a shareholder because he did not want to be the guarantor of all of Intramodal's debts and transferred his shares to Rosati.

In accepting the trial judge's findings of fact, the majority found Menillo's oppression claim to be groundless. Despite the fact that the corporation failed to comply with legal formalities, the majority found that Mennillo could not have had a reasonable expectation of being treated as a shareholder.6 In concurring reasons, Chief Justice McLachin (Moldaver J. concurring), noted that the appeal could be disposed of on the basis that Mennillo failed to show a reasonable expectation that he would not be removed as a shareholder from Intramodal's books.7

The majority reiterated the constituent elements that are required for any oppression claim to succeed:

  1. The claimant must "identify the expectations that he or she claims have been violated ... and establish that the expectations were reasonably held."8
  2. The claimant must show that "those reasonable expectations were violated by conduct falling within the statutory terms, that is, conduct that was oppressive, unfairly prejudicial to or unfairly disregarding of the interests of any security holder."9

While the corporation failed to comply with the requirements of the CBCA, the failure to comply with the statute, on its own, did not constitute oppression. The majority further held that "the oppression remedy is a discretionary one that is equitable in nature." In order to trigger the remedy, conduct must frustrate reasonable expectations, not merely run afoul of the CBCA.10

Corporate Law issues

While not central to the appeal, the majority also discussed some corporate law issues that will be of interest to corporations operating in Canada, particularly those in Québec.

Can a share transfer be retroactively cancelled?

The CBCA sets out the two ways in which an issuance of shares can be cancelled: (1) if the corporation's articles are amended or (2) if the corporation reaches an agreement to purchase the shares, which requires a directors' resolution, the shareholder's express consent and that the tests of solvency and liquidity be met. The majority stated that it is not possible to retroactively cancel an issuance of shares by way of simple oral consent. 11

What were the consequences of failing to observe the formalities prescribed by the CBCA?

Intramodal's failure to comply with the s. 76(1)(a) of the CBCA that a registered security be endorsed when presented for transfer did not in and of itself invalidate any transfer between the shareholders, as Mennillo ceased to be a shareholder in Intramodal as a result of his transfer of shares to Rosati rather than as a result of an improper registration.

The majority took the view that the failure to comply with the endorsement requirement under s. 76(1)(a) of the CBCA resulted in the failure of the share transfer (pursuant to ss. 60(1) and 65(3) of the CBCA) and a nullity of the transfer, pursuant to articles 1414 and 1416 of the C.C.Q.. The majority observed that this could have resulted in an attack on the transfer on the basis of non-compliance with this formality, had Mennillo sought judicial intervention within three years of becoming aware of the cause of nullity, as prescribed by articles 2925 and 2927 of the C.C.Q..12

Could the shares have been issued conditionally?

The dissenting judge at the Court of Appeal understood the trial judge's reasons as holding that the issuance of the shares to Mennillo had been conditional on his remaining as a guarantor to the corporation. The dissenting judge stated that such conditional status is not set out in the CBCA, and even if it were, such status would have to be specified in the corporation's books. While disagreeing with the dissenting judge's reading of the trial decision, Justice Cromwell substantially agreed with the dissenting appellate judge's position regarding conditional share issuances, and explained that conditions attaching to shares need to be specified in the articles of the corporation and in the securities register.

Dissenting reasons

In her dissent, Justice Côté harkened back to the deep roots of corporate law in Canada to and based her lengthy reasons on: (1) the distinct nature of the corporate personality, and (2) the rule of preservation of capital. Using these principles, Justice Côté explained that corporations are required to operate in accordance with the applicable statutes (in this case, the C.C.Q. and the CBCA) in a manner that does not weaken the strict formal requirements of corporate law, nor confuse the business corporation with the partnership. In Justice Côté's view, had the parties intended their business relationship to be governed by informal dealings, they should have formed a partnership at the outset of their relationship. Once incorporated, Intramodal was required to strictly comply with the formal requirements of the C.C.Q. and CBCA, rather than confuse its interests with its majority shareholder and take a "distrubingly lax" approach to its legal duties.

Function over form? Don't forget good form

This decision will be of particular interest to closely held corporations and fast-growth companies that emphasis function over formality. While this decision may appear to be a win for business function over legal formality, the majority's clear warning that a corporation needs to adhere to statutory requirements, coupled with Justice Côté's strong dissent, serves as reminder to businesses to ensure legislative compliance. By the same token, this decision offers an important reminder for large corporations and activist shareholders: failure to adhere to statutory obligations may give rise to statutory claims in addition to, or in lieu of, an oppression claim.

Case Information:

Citation: Mennillo v. Intramodal Inc., 2016 SCC 51

Docket: 36124

Date: November 18, 2016


[1] Canada Business Corporations Act (R.S.C. 1985, c. C-44).

[2] 2008 SCC 69 [BCE].

[3] BCE at para. 58.

[4] Para. 10.

[5] Paras. 21 – 22.

[6] Paras. 55 – 58.

[7] Para. 86.

[8] BCE, at para. 70.

[9] BCE, at para. 68; s. 241(2) CBCA.

[10] Para. 11.

[11] Para. 63.

[12] Paras. 71 – 74.

To view original article, please click here.

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.

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
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 you may opt out by clicking here

    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.

    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.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    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.

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