Canada: Failure To Register Share Transfer Doesn't Mean That It Didn't Happen: Supreme Court Of Canada Denies Oppression Remedy Claim

Last Updated: June 23 2017
Article by Masiel A. Matus

The Supreme Court of Canada in Mennillo v. Intramodal Inc. held that a small, closely held corporation's failure to comply with some of the requirements under the Canada Business Corporations Act (CBCA) before registering a share transfer was not in and of itself oppressive conduct prohibited by the CBCA's oppression remedy at Section 241.

Facts

Intramodal was a two-person privately-held road transportation company established by Johnny Mennillo and Mario Rosati in 2004. Before Intramodal was incorporated, Mennillo and Rosati agreed upon their roles in the company by way of a handshake. Rosati would contribute his skills to the business and Mennillo would provide financing. After Intramodal's incorporation, Mennillo and Rosati became Intramodal's directors, officers and shareholders. Neither paid for their shares and Mennillo's share certificate was never signed, both of which run afoul of the requirements under the CBCA. The dealings between the parties were very informal. The parties rarely complied with the formalities of the CBCA or put things in writing.

Mennillo resigned as a director and officer of Intramodal by way of letter on May 25, 2005. A notice of resignation was prepared by Intramodal's lawyer and Mennillo signed it. The notice referred to Mennillo's removal as director and officer only. Mennillo subsequently advanced loans to Rosati which were repaid by 2009. In December 2009, Rosati gave Mennillo a cheque marked "Full and Final Payment".

A dispute subsequently arose about whether Mennillo continued to be a shareholder of the company. Mennillo argued that he did not intend to be removed as a shareholder when he resigned as an officer and director in 2005. Intramodal denied this and argued that Mennillo had in fact resigned as a shareholder and transferred his shares to Rosati consistent with the parties' agreement that Mennillo would only hold shares so long as he was guaranteeing the company's debts.

Intramodal's lawyer filed an amended declaration indicating that Mennillo had been removed as director, officer and shareholder of Intramodal as of July 2005. This declaration was signed by Intramodal's lawyer but not Mennillo.

Mennillo brought an oppression claim against Intramodal under section 241 of the CBCA alleging that Intramodal's conduct in removing him as a shareholder was, in the words of the CBCA, "oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder [i.e. Mennillo], creditor, director or officer, the court may make an order to rectify the matters complained of."

Trial and Appellate Court

At trial, the judge dismissed Mennillo's oppression claim and found that Mennillo held his shares in Intramodal on the condition that he was guaranteeing its debts. As of May 25, 2005, the fact was that Mennillo did not want to be a guarantor for Intramodal's debts and thus, he could not continue as a shareholder. Mennillo asked to be removed as a shareholder and his shares were transferred to Rosati. Intramodal had not complied with the formalities of the CBCA to complete the actual transfer of Mennillo's shares to Rosati, but the court found that this was simply an error or oversight.

The Quebec Court of Appeal dismissed Mennillo's appeal.

Elements of Oppression

The Supreme Court revisited their decision on the nature and elements of an oppression claim as set out in their prior case BCE Inc. v. 1976 Debentureholders. To establish oppression, a claimant must:

  1. Identify the expectations they claim to have been violated and show that the expectations were reasonably held; and
  2. Show that those reasonable expectations were violated by conduct that is oppressive, unfairly prejudicial to or unfairly disregarding of the interests of any security holder.

The Supreme Court affirmed the trial judge's decision and held that Mennillo's oppression claim must fail because he could not have had any reasonable expectation of being treated as a shareholder after May 25, 2005. As of that date Mennillo had expressly requested to be removed as a shareholder and that his shares be transferred to Rosati.

While there was no evidence in writing of the share transfer having been effectuated, it was open to the trial judge to deem that it had been in effect completed given the informal nature of the parties' business dealings and their history of carelessness toward the corporate formalities required under the CBCA. Intramodal's sloppy paperwork did not, in and of itself, invalidate the share transfer nor was it oppressive, prejudicial or did it unfairly disregard Mennillo's interests. Intramodal had treated Mennillo exactly as he wanted to be treated.

Oppression will be judged on a contextual approach

Many of the legal difficulties that arose in this case were as a result of the parties' lax approach to formality in the parties' business dealings. The Supreme Court reinforced the notion that an oppression claim will be judged on a contextual approach. The courts will consider the conduct of the parties throughout a business relationship in determining the reasonable expectations of a claimant advancing an oppression claim.

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 Mondaq.com.

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

Authors
Masiel A. Matus
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
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
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

Mondaq.com (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 www.mondaq.com

To Use Mondaq.com 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.

Disclaimer

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.

General

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