Canada: The Supreme Court Of Canada Rules On The Personal Liability Of Directors In The Context Of The Oppression Remedy.

Last Updated: July 27 2017
Article by Martin Sheehan, Vincent Cérat Lagana and Mathieu Leblanc-Gagnon


The Supreme Court of Canada rendered a decision in Wilson v. Alharayeri, in which it discusses situations that could lead to the personal liability of a corporate director in the context of an action for corporate oppression under section 241 of the Canada Business Corporations Act (''CBCA'').

The Court stated that there is no doubt that a director can be held personally liable under this provision, as it confers broad powers to the courts and provides an impressive number of remedies in favour of the complainant. The Court added, however, that section 241 does not identify the situations in which an order for compensation may properly lie against the corporate directors personally, as opposed to the corporation itself. This question was the focus of the Supreme Court's decision.

In line with the decisions rendered by the Superior Court and the Quebec Court of Appeal, the Supreme Court held that the two directors were personally liable considering that (i) the oppressive conduct was properly attributable to them because of their personal involvement in the oppressive conduct and (ii) this personal liability was relevant in light of the circumstances. In doing so, the Supreme Court refused to depart from the lessons learned from the Ontario Court of Appeal's decision in Budd v. Gentra Inc1 (hereafter ''Budd'').

In reaching this conclusion, the Supreme Court of Canada reiterates that the remedial purpose of the oppression remedy is one of commercial fairness. As such, the slavish respect of rigid criteria is to be avoided in favor of an analysis of the circumstances of each particular case. Having said this, the good or bad faith of the director and whether or not he obtained personal gain are factors to consider.


The Respondent, A, was the President, the Chief Executive Officer, a significant minority shareholder and a director of Wi2Wi Corporation (hereafter the ''Corporation'') from 2005 to 2007. A held common shares and Class A and B preferred shares in the Corporation. The Class A and Class B shares were convertible into common shares if the Corporation met certain financial targets2. The Appellant, W, held Class C shares, granted to persons responsible for the financing of the Corporation and also convertible into common shares if the Corporation met certain financial targets.

In 2007, the Corporation negotiated a merger with another business named Mitec Telecom Inc. (hereafter ''Mitec''). While negotiating the merger, and without notifying the Corporation's Board of Directors, A was also negotiating the sale of his own shares in the Corporation with Mitec. The Company's Board discovered A's personal share purchase agreement and this triggered A's resignation as President, CEO and director of the company on June 1, 20073.

Three months later, in September 2007, the Corporation's Board of Directors decided to proceed with a Private Placement by offering secured notes convertible into common shares to shareholders already holding Common Shares (hereafter the ''Private Placement''). The more common shares that a shareholder held, the more convertible secured notes he could obtain. The effect of the Private Placement was to ''substantially dilute the proportion of common shares held by any shareholder who did not participate in it"4.

Prior to the Private Placement, the Board of Directors chose to accelerate the process of converting C shares into common shares for W. This conversion process went ahead despite doubts expressed by the Corporation's auditors as to whether the test for the conversion had been met5.

On the other hand, the Board of Directors never approved the conversion of A's Class A and B Shares into common shares, although the Company's audited financial statements demonstrated that, on the basis of the financial test laid out, such a conversion could occur at the option of the holder. W and another director, Dr. Black, who were the two members of the audit committee, opposed the conversion on the basis of A's past conduct6.

The Board of Directors never sent A a formal notice of his crystallized conversion rights. A was therefore unable to convert his preferred shares into common shares. As a result, A's proportion of common shares and the value thereof were significantly reduced. This prompted A to file for the oppression remedy against four of the Corporation's directors7.

Superior Court Judgement8 and Court of Appeal Judgement 9

The Honorable Justice Stephen Hamilton held that A had a reasonable expectation that his Class A and B shares would be converted if they met the applicable financial tests associated with the conversion. This reasonable expectation was breached. The Superior Court applied the principles of the Ontario Court of Appeal decision in Budd to hold two directors, W and Dr. Black, personally liable. Applying Budd, the Superior Court held that it was ''fit'' to hold the directors personally liable because 1) they personally benefited from the dilution of A's shares and 2) W further benefited from the conversion of his Class C shares into common shares10.

The Court of Appeal upheld the Superior Court's judgment. The Court of Appeal attached great importance to the fact that W and Dr. Black were the only members of the Board's audit committee and thus they had a significant influence on the Board of Directors' decision to oppose the conversion of A's shares11.

The appeal to the Supreme Court of Canada did not dispute the existence of oppressive conduct, it focussed solely on the personal liability of the directors.

Supreme Court of Canada Ruling

The Supreme Court of Canada recalls and confirms many principles referenced in the BCE12 case, a landmark decision with regards to the circumstances necessary to bring forward an oppression remedy application. First and foremost, however, the Court analyzes the possibility for a plaintiff to obtain redress against the directors of a corporation in the context of such an application.

Section 241(3) of the CBCA gives the court broad discretion to issue orders it deems necessary, whether it be an interim or final order. The Supreme Court of Canada notes that most of the remedial powers provided in section 241(3) of the CBCA deal with the potential liability of people other than the Corporation13. The issue was to determine when it is appropriate to hold the directors personally liable, in particular when the remedy is of a pecuniary nature.

With regards to this question, the Supreme Court of Canada sees no reason to question the principles established in Budd concerning the personal liability of the directors in matters of oppressive conduct. Budd establishes that personal liability can be established when (i) the director is directly involved in the oppressive conduct and the oppressive conduct is attributable to the director and (ii) the order is appropriate considering all of the circumstances14.

In addition to these two requirements, in Budd, the Court conducted a survey of the case law illustrating when personal orders against directors may be appropriate. The Supreme Court cited author Markus Koehnen, who notes five situations in which personal orders against directors might be appropriate:

  1. Where directors obtain a personal benefit [...] from their conduct;
  2. Where directors have increased their control of the corporation by the oppressive conduct;
  3. Where directors have breached a personal duty they have as directors;
  4. Where directors have misused a corporate power;
  5. Where a remedy against the corporation would prejudice other security holders.

[33] According to Koehnen, Budd may have also referred to a sixth category of cases: those "involving closely held corporations where a director or officer has virtually total control over the corporation" (p. 202; and Budd, at para 44)"15.

However, the Court notes that courts have applied Budd in many different ways and that the appellant "urges the Court to adopt necessary criteria governing the imposition of personal liability in every case"16. The Appellant's proposal was rejected by the Court.

i) Bad Faith and Personal Benefit

Firstly, the appellant, W, argued that personal liability orders should be appropriate only if the director "pulls the strings" of the Corporation as if it was his alter ego and acts in bad faith in this context. W contended that he was just one director among many others. The Court rejects this argument because it considers that the appellant is trying to replace the analysis of the oppression remedy by a strict common law analysis. The Court reiterates that under section 241 of the CBCA, it must apply "general standards of commercial fairness" which common law has failed to promote. According to the Court, a director who involves himself in oppressive conduct, notably for personal gain, must be held responsible even if he does not control the Corporation17. Adopting the appellant's proposed control criterion would automatically preclude the directors of public corporations from being held responsible18.

With regards to the bad faith of the directors, the Court views it as an important factor but not as a condition sine qua non. The Court accepts that directors can be held personally liable for oppressive conduct even in the absence of bad faith. That being said, "A director who acts out of malice or with an eye to personal benefit is more likely to attract personal liability than one who acts in good faith"19. Also, personal benefit should not be treated as a necessary condition for personal liability but is still a relevant factor; the presence or absence of this condition should be examined by the courts20.

Broadly speaking, the Court concludes that the five situations identified by Markus Koehnen, and arising from Budd, must be seen as indicators, not "a closed list of factors or a set of criteria to be slavishly applied"21. This analysis is similar to the one the Supreme Court of Canada had conducted in BCE, when referring to indicators with regards to the existence of reasonable expectations, it noted that it is impossible to establish an exhaustive list of such indicators22.

ii) Fitness of the Remedy

The Court subsequently analyses the notion of "fitness", describing it as a necessarily amorphous concept. This notion is crucial considering that even if the conduct is attributable to the director, the remedy opposed to the director must nevertheless be considered "fit". On this issue, the Court states four general principles that should guide courts in determining a fit order. We believe these principles are not only applicable to the issue of director liability but also to all questions relating to the appropriateness of orders in cases of oppression remedies. (i) First, fairness, qualified as "unamenable to formulaic exposition" must be assessed, (ii) the order must not go further than necessary to rectify the oppression, (iii) the order must only serve to vindicate the reasonable expectations of the complainant, and (iv) the order must take into account the "general corporate law context" and the analysis must be broader than the specific liability of directors under the oppression remedy23. These principles simply constitute guidelines as the fashioning of a fit remedy is a fact-dependant exercise24.

The Court enumerates four potential scenarios arising out of a director's conduct:

  1. The director acted in bad faith and obtained a personal benefit;
  2. The director acted in bad faith but did not obtain a personal benefit;
  3. The director acted in good faith and obtained a personal benefit;
  4. The director acted in good faith and did not obtain a personal benefit25.

In the first scenario, it is likely "fit" to hold the director personally liable for the oppression, whereas the opposite is true in the fourth scenario. The Court notes that the "less obvious cases will tend to lie in the middle"26.

iii) Application of the principles in this case

Applying these principles to the case at hand, the Court adopts a deferral stance in reviewing the trial court's findings. The trial judge held that W and Dr. Black had played lead roles in the Board's decision and that such a decision had granted a personal advantage to W, particularly in the context of the conversion of his class C Shares. The remedy went no further than necessary to rectify the respondent's loss. Indeed, the trial judge calculated A's loss resulting from the inability to convert his class A and B Shares and to take part in the Placement. This reflects A's reasonable expectations27.

iv) Arguments regarding the Pleadings

Finally, W submitted that the pleadings were inadequate to ground the imposition of personal liability and did not give him the chance to defend himself. The Court of Appeal and the Supreme Court of Canada rejected this plea28.


There are several important lessons to take away from this decision. We will focus on three.

First, the situations in which a director can be held personally responsible under the oppression remedy are broad and fact-specific. Such situations are not limited to strict concepts such as the existence of total control of the corporation by the director. W and Dr. Black did not have this control.

Secondly, the existence of bad faith on the director's part and the personal gain he receives are both important indicators that the Court cannot ignore. As such, it is up to the Court to detect whether these indications are present.

Most importantly, analysis should never be done through fixed tests or strict criteria. As is often the case with the oppression remedy, everything is a question of facts and circumstances and the Court holds wide discretion.


1 Budd v Gentra Inc (1998), 43 BLR (2d) 27 (ON CA), 1998 CanLII 5811 (ON CA); Wilson, ibid at para 2.

2 Wilson, ibid at para 4.

3 Ibid at para 6.

4 Ibid at para 9.

5 Ibid at para 10.

6 Ibid at para 11.

7 Ibid at paras 11 to 13.

8 2014 CanLII 180 (QC SC).

9 2015 CanLII 1350 (QC CA).

10 Wilson, supra note 1 at paras 14 to 16.

11 Ibid at paras 17 to 20.

12 BCE Inc v 1976 Debentureholders, 2008 SCC 69 (hereafter ''BCE''). Wilson, ibid at paras 22 to 24.

13 Wilson, ibid at paras 25 to 29.

14 Ibid at para 31.

15 Ibid at paras 32 to 33.

16 Ibid at paras 35 to 36.

17 Ibid at paras 37 to 39.

18 Ibid at para 40.

19 Ibid at paras 41 to 43.

20 Ibid at paras 44 to 46.

21 Ibid at para 50.

22 BCE, supra note 13 at para 71.

23 Ibid at paras 52 to 56.

24 Ibid at para 57.

25 Ibid at para 50.

26 Ibid at para 51.

27 Ibid at paras 58 to 67.

28 Ibid at paras 68 to 73.

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