What is the scope of the oppression remedy under Section 241
of the Canada Business Corporations Act (CBCA)? That
was the question recently considered by the Ontario Superior
Court of Justice.
In Manufacturers Life Insurance Company v. AFG
Industries Ltd., one of the defendants, a Delaware
corporation (USCo) sought an order striking out those portions
of the statement of claim pleaded against it and its Canadian
subsidiary, a CBCA corporation (CanCo) or, alternatively, for
an order dismissing the action against USCo.
The plaintiff's claim was that it had been oppressed as
a result of the actions of USCo in causing CanCo to divest
itself of all of its assets. This divestiture, the plaintiff
stated, thereby impaired its ability to recover against CanCo
in the event that its claim against CanCo for recovery of
environmental remediation costs was successful. The plaintiff
alleged it had incurred these costs as a result of CanCo's
use of the plaintiff's property in Ontario between 1969 and
The plaintiff sought, among other things, declarations that
it was a complainant under Section 238 of the CBCA, and that it
had been oppressed by USCo under Section 241 of the CBCA. The
plaintiff claimed that because of amounts it had expended or
would expend on the remediation of its property, it was a
creditor of CanCo, a CBCA corporation, that USCo was an
affiliate of CanCo as defined in subsections 2(1) and (2) of
the CBCA, and that USCo's actions were unfairly prejudicial
to the plaintiff or unfairly disregarded its interests as a
creditor of CanCo.
USCo pleaded that the statutory cause of action created by
Section 241 of the CBCA does not apply to a non-CBCA
corporation, and that the plaintiff could not bring an
oppression claim because it was not a creditor of CanCo. In
USCo's view, the plaintiff was at most a contingent
creditor, with a claim for unliquidated damages, and would only
become a creditor upon obtaining a judgment.
Who Is An Oppressor?
With respect to the scope of Section 241 of the CBCA and its
application to USCo, the judge determined, as described further
below, that the plaintiff's complaint was made in its
capacity as a creditor of CanCo, a CBCA corporation, and that
it was complaining of the conduct of an affiliate of CanCo,
namely its parent, USCo, which affected the plaintiff's
interests in CanCo. In the CBCA, an "affiliate" is
defined to mean an affiliated body corporate, which includes a
parent corporation; "body corporate" is defined to
include a company or other body corporate, wherever or however
incorporated, and thus need not be a CBCA corporation.
Accordingly, the court found that such claim may lie against a
non-CBCA affiliate, including one that is a foreign
Who Is A Creditor?
With respect to the question of whether the plaintiff was a
creditor of CanCo and able to bring the action under Section
238 of the CBCA, the court relied on other Ontario decisions in
asset-stripping oppression actions where the court granted to a
plaintiff, who was also only a contingent creditor standing as
a "proper person" and hence a
"complainant," to bring an action under the
oppression remedy provisions. Section 238 of the CBCA lists as
a "complainant" only a security holder, a director or
officer, the Director appointed under the CBCA, and "any
other person who, in the discretion of a court is a proper
person to make an application under this Part."
An OBCA Perspective
The court paid particular attention to the language of the
oppression remedy in subsection 248(2) of the OBCA referring to
conduct "that is oppressive or unfairly prejudicial to or
that unfairly disregards the interests of any security holder,
creditor, director or officer." It observed that this
language differs from that in the CBCA, where the phrase
"of the corporation" appears at the end of the longer
phrase. After considering a line of other Ontario court
decisions with respect to oppression remedies, the court noted
that it remained an open question as to whether a security
holder, creditor, director or officer of a non-CBCA affiliate
— rather than of its affiliated CBCA corporation —
can bring an oppression action against that affiliate, under
subsection 241(2) of the CBCA, for oppressive conduct of either
the CBCA corporation or the non-CBCA affiliate. The plaintiff
in this case was, of course, considered to be a creditor of
CanCo, a CBCA corporation. At least one of the other Ontario
decisions decided that under the OBCA, the interest affected
must be that of a security holder, creditor, director or
officer of the OBCA corporation itself.
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general guide to the subject matter. Specialist advice should
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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