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Oppression actions and derivative claims offer distinct remedies when the directors of a closely held company have caused harm to the corporation or its shareholders. The Ontario Superior Court of Justice's recent decision in Clark v. Cen-Ta Real Estate Ltd et al., 2025 ONSC 5759, offers guidance on when investors may pursue these remedies in parallel.
What happened?
Chris Clark, the largest shareholder in both Cen-Ta Real Estate Ltd. and Plum Financial Planning Ltd., alleged that the directors of these corporations had awarded themselves and their personal companies excessive compensation, even as the companies' revenues and profitability declined.1 Mr. Clark sought leave to commence a derivative action under s. 246 of the Ontario Business Corporations Act ("OBCA"), aiming to recover funds for the companies and to set future limits on director compensation.2 Mr. Clark was already pursuing an oppression remedy against the same directors, seeking damages and a buyout of his shares.3
Oppression claims vs. derivative actions
Oppression claims are designed to protect the personal interests of shareholders and other stakeholders who have been treated unfairly by the corporation or its directors. The focus is on harm to the legal and equitable interests of the complainant as a stakeholder.4
On the other hand, derivative actions are brought on behalf of the corporation itself to address harm done to the company, typically by its own directors or officers. In these cases, the complainant acts as a representative of the corporation to enforce rights that belong to the company, such as claims for breach of fiduciary duty.5
Both actions proceed in parallel
In Clark, the Court recognized that oppression claims and derivative actions serve distinct legal purposes and can proceed in parallel, even where the parallel claims are based on the same facts. The Court made several key points in arriving at this conclusion:
- Distinct harms: The relief sought in both actions may overlap, but each type of action serves a different legal purpose. The oppression remedy addresses harm to shareholders' personal interests, while the derivative action addresses harm to the corporation itself.6
- Overlap is permissible: In closely held corporations, wrongful acts may harm both the corporation and individual shareholders.7The Court therefore held that the existence of a parallel oppression claim does not automatically preclude a derivative action, especially where the wrongful acts addressed by the derivative action were committed against the company rather than the individual seeking to bring the derivative action.8
- Procedural management: Concerns about inefficiency or inconsistent findings can be managed by consolidating the actions or having them proceed in tandem.9 In this way, parallel actions would not necessarily entail costly inefficiencies or risk inconsistent findings.10 In Clark, the Court concluded that proceeding in tandem would not likely trigger significant inefficiencies, inconsistencies, or other problems with the litigation.11
Assessing the "best interests of the corporation"
The Clark decision also offers a detailed analysis of how courts determine whether a proposed derivative action is in the best interests of the corporation, as required by s. 246(2)(c) of the OBCA.12 The test is not simply whether the action benefits shareholders, but whether it maximizes the value of the corporation itself.13
The court considers:
- Whether there is an arguable case: The moving party — that is, the plaintiff seeking to sue on behalf of the corporation — must show that the proposed action discloses an arguable claim that directors breached their duties to the corporation.14
- Potential benefit vs. harm: The court weighs the potential benefit of a successful action against the harm that litigation may inflict on the corporation, such as financial cost and operational harm.15
- Contextual analysis: The court conducts a contextual analysis to determine whether, on balance, proceeding with the litigation is truly in the corporation's best interests.16
- Remedial Interpretation: The requirements for leave to bring a derivative action under s. 246 of the OBCA are remedial and are to be interpreted liberally in favour of complainants.17
Practical implications
For closely held companies, their directors, and their investors, the Clark decision is illuminating. It confirms that:
- A derivative action for breach of fiduciary duty may proceed even if an oppression claim based on the same facts is already underway.18
- The court will focus on whether the complainant is acting in good faith and whether the derivative action is in the corporation's interests, not simply on the existence of a parallel claim.19
- Procedural tools such as consolidation or issue estoppel can address concerns about duplication or inconsistency.20 Courts will be inclined to manage parallel cases together to ensure efficiency, and litigants should approach their cases accordingly.
For investors, this decision provides a clear pathway to pursue both personal and corporate remedies when directors' conduct threatens the health and value of a closely held corporation. For companies and their directors, it provides a roadmap for avoiding liability and to manage disputes efficiently and fairly when they arise.
Footnotes
1. Clark v. Cen-Ta Real Estate Ltd et al, 2025 ONSC 5759 [Clark], at paras 1, 15-17 and 19-22.
2. Clark, at paras 1 and 36-37.
3. Clark, at paras 3 and 25-26.
4. Clark, at para 72, citing BCE Inc. v. 1976 Debentureholders, 2008 SCC 69 [BCE], at para 45.
5. Clark, at paras 71 and 127, citing Macreanu v. Godino, 2020 ONSC 535 [Macreanu], at para 58.
6. Clark, at paras 71-72, citing BCE at paras 43 and 45.
7. Clark, at paras 124–126, citing Rea v. Wildeboer, 2015 ONCA 373, at para 40; Malata Group (HK) Ltd. v. Jung, 2008 ONCA 111, at paras 14 and 29; Macreanu, at para 57.
8. Clark, at paras 127–128. See also: Ernst & Young Inc. v. Essar Global Fund Limited, 2017 ONCA 1014, at para 131.
9. Clark, atparas 130–131, citing Macreanu, at para 61.
10. Clark, atparas 132, citing Drake v. Goodwin, 2019 ONSC 2865 [Drake], at paras 44-45.
11. Clark, at para 131.
12. Clark, at paras 101-132.
13. Clark, at para 101, citing Peoples Department Stores (Trustee of) v. Wise, 2004 SCC 68, at para 46.
14. Clark, atpara 104, citing Drake, at para 13.
15. Clark, atparas 105–106, citing Zeifmans LLP v. Mitec Technologies Inc., 2019 ONSC 3643, at paras 80-81; Melnyk v. Acerus Pharmaceuticals Corporation, 2017 ONSC 1285, at paras 38–43.
16. Clark, at para 107, citing Crescent (1942) Ltd. v. Jones, 2011 ONSC 756, at para 20.
17. Clark, atparas 60 and 129, citing Macreanu, at para 61.
18. Clark, at para 128.
19. Clark, at paras 67–100 and 101–132.
20. Clark, at paras 130–132.
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