Canada: Supreme Court Of Canada Affirms Test For Personal Liability Of A Director For Oppressive Conduct

Last Updated: October 27 2017
Article by Payton Holliss

The Supreme Court of Canada (SCC) recently provided some clarity to the test for finding directors personally liable for oppressive conduct in Wilson v Alharayeri (Wilson).1 Under most Canadian corporate statutes, the "oppression remedy" provides for relief to stakeholders where conduct is (i) oppressive; or (ii) unfairly prejudicial to; or (iii) unfairly disregards the interests of stakeholders. The oppression remedy provides courts with broad discretion to make any order it thinks fit to correct matters complained of by a stakeholder against not only a corporation but also against directors of that corporation. The difficult issue tackled by the SCC in Wilson was determining when a court is justified in making an order for damages under the oppression remedy personally against a director, as opposed to the corporation itself.

Wilson involved actions of the Board of Directors of Wi2Wi Corporation in relation to Ramzi Alharayeri, a shareholder and the former President and Chief Executive Officer of the company. The Board determined to proceed with a private placement of convertible secured notes to its holders of common shares. Alharayeri held two classes of preferred shares that were convertible into common shares if certain financial targets were met. Prior to proceeding with the private placement, the Board determined not to permit the conversion of Alharayeri's convertible preferred shares, which prevented Alharayeri from participating in the private placement. Conversely, the conversion of a third class of preferred shares, some of which were beneficially owned by Andrus Wilson, the new President and Chief Executive Officer, was permitted and as a result Wilson participated in the private placement. Significantly, the financial statements of Wi2Wi indicated that the financial tests for conversion of Alharayeri's convertible preferred shares had been met. On the other hand, the auditors of Wi2Wi had expressed doubts as to whether the test for conversion of Wilson's convertible preferred shares had been satisfied.

Alharayeri filed an action under the oppression remedy against four of Wi2Wi's directors, including Wilson, alleging that they had unfairly disregarded Alharayeri's reasonable expectations. The trial judge, in a decision upheld by the Quebec Court of Appeal, found that Alharayeri's expectations were reasonable and had been unfairly disregarded. Both Wilson and one other director, Hans Black who were members of Wi2Wi's audit committee, were found personally liable as they had advocated against conversion of Alharayeri's shares. As the only members of Wi2Wi's audit committee, it was determined that Wilson and the other director must have known that the conversion rights for Alharayeri's shares had crystallized and had significance influence over the decision to disallow the conversion of the shares. They were also found to have personally benefitted from the decision to prevent the conversion of Alharayeri's shares as it allowed them to increase their control of Wi2Wi through participation in the private placement. Wilson was additionally found to have benefitted from the conversion of his convertible preferred shares notwithstanding issues as to whether the test had been met.

The SCC confirmed the lower court's decision and provided guidance on applying the test for finding directors personally liable under the oppression remedy.

Developed in Budd v Gentra Inc.2, the Budd Test is the standard test to determine the personal liability of a director, if any, once oppressive conduct is found. The SCC in Wilson described the Budd Test as requiring a two pronged approach:

  1. the oppressive conduct must be properly attributable to the director because of his or her implication in the oppression; and
  2. the imposition of personal liability must be fit in all the circumstances.3

In discussing the Budd Test, the SCC referred to examples, such as personal benefit and bad faith, in which personal orders against a director may be appropriate. However, courts have differed in their understanding of these examples; some courts treating them as factors to be considered, others as necessary conditions for the imposition of personal liability. With this in mind, the SCC upheld the Budd Test as the proper test when determining the personal liability of a director, and further elaborated on the test by identifying four general principles to guide courts in fashioning a fit remedy.

  1. the oppression remedy request must in itself be a fair way of dealing with the situation;4
  2. any order should go no further than necessary to rectify the oppression;5
  3. any order may serve only to vindicate the reasonable expectations of security holders, creditors, directors or officers in their capacity as corporate stakeholders;6 and
  4. a court should consider the general corporate law context in exercising its remedial discretion.7

The Budd Test was given greater clarity by the SCC, especially in regards to fashioning a "fit" order of personal liability. However, the SCC was careful not to be too specific when addressing the Budd Test in order to enable sufficient flexibility and discretion and to allow for fact specific application.

It is noteworthy that one of two main elements are likely to be present in all successful personal liability oppression claims against directors — personal benefit and/or bad faith. The SCC emphasized that personal benefit and bad faith remain hallmarks of conduct properly attracting personal liability, and although the possibility of personal liability in the absence of both of these elements is not foreclosed, one of them will typically be present in cases in which it is fair and fit to hold a director personally liable for oppressive corporate conduct.8

The SCC also confirmed that a "lead role" alone is not sufficient to find a director personally liable; "something more" is required to satisfy the Budd Test. In Wilson, it was not enough that Andrus Wilson assumed a lead role in disallowing Alharayeri's preferred share conversion. However, the fact that Wilson personally benefited by allowing for the conversion of his convertible preferred shares and participating in the private placement, resulting in a devalued position for Alharayeri, was enough to find personal liability and distinguish him from other Board members (other than Hans Black who was found to be personally liable as he also had a lead role in the oppressive conduct and participated in the private placement). Further, the SCC confirmed that despite the Board voting unanimously in favour of the private placement, this in itself was not enough to remove personal liability when evaluating the conduct of Wilson.

The SCC recognizes that this decision does not provide perfect certainty of personal liability to corporate directors going forward. Inherent in a court's oppression remedy power is broad discretion in situations that are highly fact specific. With this in mind, it is essential that corporate directors always declare potential conflicts of interest as early as possible, and where appropriate, evidence their dissent towards potentially oppressive board decisions.


1 Wilson v Alharayeri, 2017 SCC 39 [Wilson].

2 Budd v Gentra Inc. (1998), 43 BLR (2d) 27.

3 Wilson at para 31.

4 Wilson at para 49.

5 Wilson at para 53.

6 Wilson at para 54.

7 Wilson at para 55.

8 Wilson at para 50.

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.

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