LEXPERT MAGAZINE
|
SEPTEMBER 2017 13
under s. 241 of the Canada Business Cor-
porations Act for oppression against four
Wi2Wi directors, including the appellant.
e trial judge held the appellant and
another director solidarily liable for the
oppression and ordered them to pay com-
pensation to the respondent. In dismissing
the appeal, Quebec's Court of Appeal held
that the imposition of personal liability
was justified.
"Section 241(3) [the oppression rem-
edy] of the Canada Business Corporations
Act gives a trial court broad discretion to
'make any interim or final order it thinks
fit,' " Justice Suzanne Côté wrote. "[T]he
Act's wording goes no further to specify
when it is fit to hold directors personally li-
able under this section. As stated in the lead-
ing decision, Budd v. Gentra Inc. (1998), 43
B.L.R. (2d) 27 (Ont. C.A.), determining
the personal liability of director requires a
two-pronged approach. First, the oppres-
sive conduct must
be properly attrib-
utable to the direc-
tor because of his
or her implication
in the oppression.
Second, the im-
position of person-
al liability must be
fit in all the cir-
cumstances."
At least four general principles should
guide courts in fashioning a fit remedy
under s. 241(3) of the CBCA, Justice Côté
wrote. "First, the oppression remedy re-
SCC clarifies oppression remedy
Supreme Court upholds Budd v. Gentra in defining remedy in directors' personal liability cases BY ELIZABETH RAYMER
quest must in itself be a fair way of dealing
with the situation. … Second, any order
should go no further than necessary to rect-
ify the oppression. ird, any order may
serve only to vin-
dicate the reason-
able expectations
of security holders,
creditors, directors
or officers in their
capacity as corpor-
ate stakeholders.
And fourth, a court
should consider the
general corporate
law context in exer-
cising its remedial discretion."
Terrence J. O'Sullivan, of Lax O'Sulli-
van Lisus Gottlieb LLP in Toronto, repre-
sented the appellant. "What we sought to
do was have [the Supreme Court] introduce
a more objective test" than what existed in
Budd v. Gentra, which was a pleadings case
that relied on the subjectivity of the trial
judge in determining whether the oppres-
sion remedy was appropriate in dealing
with a corporate director, he said.
"e Supreme Court … opted instead
for an expanded subjective test, set out in
their four general principles," O'Sullivan
says. Consequently, "it is only marginally
clearer than it was before what conduct will
attract personal liability for directors."
Mitchell had argued that a court or-
dering a remedy as it saw fit was consistent
with the wording of the CBCA statute and
its oppression remedy.
"I think the appellants ... tried to estab-
lish a test, … a series of factors that must
be present in all cases before you can de-
termine that directors should be liable,"
Mitchell says.
"Ultimately, the Supreme Court said
that position is inconsistent with the pur-
pose of this statute."
THE SUPREME COURT of Canada
has clarified and confirmed the principles
of the oppression remedy in a Quebec case
that pitted a onetime company president
against current directors aer the former
saw the value of his shares reduced.
In dismissing the appeal from corpor-
ate directors in Andrus Wilson v. Ramzi
Mahmoud Alharayeri, the Supreme Court
recognized a near-20-year-old Ontario ap-
pellate court decision as good law, and up-
held the broad wording of the oppression
remedy in the Canada Business Corpora-
tions Act.
"I think the court reaffirmed the idea
that … the oppression remedy is a broad
remedy, [meant to be] applied flexibly by a
trial judge, taking into account the particu-
lar circumstances of any case," said Doug-
las Mitchell of Irving Mitchell Kalichman
LLP in Montreal, who was lead counsel for
the respondent.
e respondent had been president and
CEO of Wi2Wi Corporation before re-
signing his positions over non-disclosure
and conflict-of-interest issues during an at-
tempted corporate merger. e appellant, a
member of Wi2Wi's board, then became its
new president and CEO.
Later the board decided to issue a private
placement of convertible secured notes to
its existing common shareholders, but in
such a manner that intentionally prevented
the respondent from participating in it.
e value and proportion of his shares in
the corporation were accordingly reduced
substantially, and he filed an application
DOUGLAS MITCHELL
>
IRVING MITCHELL
KALICHMAN LLP
TERRENCE
O'SULLIVAN
>
LAX O'SULLIVAN
LISUS GOTTLIEB LLP
ON THE CASE
"I THINK THE COURT REAFFIRMED THE IDEA THAT ...
THE OPPRESSION REMEDY IS A BROAD REMEDY, [MEANT
TO BE] APPLIED FLEXIBLY BY A TRIAL JUDGE, TAKING INTO
ACCOUNT THE PARTICULAR CIRCUMSTANCES OF ANY CASE."
>
DOUGLAS MITCHELL, IRVING MITCHELL KALICHMAN LLP
