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Corporations - Oppression Remedy (2). Pereira v. TYLT Technologies Inc. (TYLTGO)
In Pereira v. TYLT Technologies Inc. (TYLTGO) (Ont CA, 2023) the Court of Appeal considered (and allowed) an appeal under the CBCA, here were the court below did not focus adequately on the 'equitable' nature of the oppression remedy::[4] I would allow the appeal and remit the matter back to the Superior Court to be decided by way of a trial. The oppression remedy is an equitable remedy. It focuses on what is fair in the circumstances of any given case, having regard to an applicant’s reasonable expectations. In determining Mr. Pereira’s reasonable expectations in this case, the application judge took an overly narrow approach by focusing primarily on the language of the documents signed by the parties, rather than all the circumstances, including Mr. Pereira’s role in founding the company and the events that led to Mr. Pereira’s termination and the buy back of his shares.
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D. PRINCIPLES THAT APPLY TO THE OPPRESSION REMEDY
[27] Section 241 of the CBCA gives a complainant, which includes shareholders and directors, the right to bring an application for an oppression remedy. Pursuant to s. 241(2) of the CBCA, what may amount to oppression conduct is defined broadly as follows:If, on an application under subsection (1), the court is satisfied that in respect of a corporation or any of its affiliates
(a) any act or omission of the corporation or any of its affiliates effects a result,
(b) the business or affairs of the corporation or any of its affiliates are or have been carried on or conducted in a manner, or
(c) the powers of the directors of the corporation or any of its affiliates are or have been exercised in a manner
that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer, the court may make an order to rectify the matters complained of. [28] On an application for an oppression remedy, s. 241(3) of the CBCA gives the court broad remedial powers, including the power to make an order setting aside a transaction and compensating an aggrieved person.
[29] Directors of a corporation owe a fiduciary duty to act in the best interests of the corporation: s. 122(1)(a) of the CBCA; BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, [2008] 3 S.C.R. 560, at para. 36. In BCE, at para. 40, the Supreme Court confirmed that, in considering the best interests of a corporation, directors may look at the interests of shareholders and employees, amongst others.
[30] In addition, at para. 45 of BCE, the Court stated that “the oppression remedy focuses on harm to the legal and equitable interests of stakeholders affected by oppressive acts of a corporation or its directors”. Also, “oppression is an equitable remedy” which “seeks to ensure fairness”; giving the court “broad, equitable jurisdiction to enforce not just what is legal but what is fair”: BCE, at para. 58. This requires the court to look at business realities, and not just at “narrow legalities”: BCE, at para. 58. Further, per BCE, at para. 59, oppression is fact-specific inquiry:What is just and equitable is judged by the reasonable expectations of the stakeholders in the context and in regard to the relationships at play. Conduct that may be oppressive in one situation may not be in another. [31] In BCE, at para. 56, the Court held that determining whether to grant the oppression remedy under s. 241(2) of CBCA involves a two-part inquiry. First, the party seeking a remedy must establish that there has been a breach of their reasonable expectations. Second, if a breach of reasonable expectations is established, the court must be satisfied that the conduct at issue amounts to “oppression”, “unfair prejudice” or “unfair disregard”.
[32] With respect to the first part of the test, which is the relevant issue on this appeal, an applicant seeking an oppression remedy “must identify the expectations that he or she claims have been violated by the conduct at issue and establish that the expectations were reasonably held”: BCE, at para. 70. The concept of reasonable expectation is “objective and contextual”: BCE, at para. 62; Baylin Technologies Inc. v. Gelerman, 2021 ONCA 45, at para. 49. In addition, conduct found to be oppressive need not be unlawful because the oppression remedy “is focused on concepts of fairness and equity rather than on legal rights”: BCE, at para. 71. Finally, in BCE, at para. 72, the Court identified the following factors as useful to determining the existence of a reasonable expectation:Factors that emerge from the case law that are useful in determining whether a reasonable expectation exists include: general commercial practice; the nature of the corporation; the relationship between the parties; past practice; steps the claimant could have taken to protect itself; representations and agreements; and the fair resolution of conflicting interests between corporate stakeholders. [Emphasis added.] E. ANALYSIS
[33] Mr. Pereira’s primary argument on appeal is that the trial judge erred in focusing on whether he had a reasonable expectation that he would continue as an employee of TYLTGO indefinitely, rather than considering his reasonable expectations as a director and shareholder of the company.
[34] I agree that the application judge approached the issue of Mr. Pereira’s reasonable expectations too narrowly. While his statement of the legal principles was correct, his application of those principles to the circumstances in this case is antithetical to the equitable nature of the oppression remedy: see Menillo v. Intramodal Inc., 2016 SCC 51, [2016] 2 S.C.R. 438, at paras. 11, 84. Rather than considering what was fair and reasonable in the circumstances of this case, he focused primarily on the strict terms of the written agreements between the parties which permitted the termination of Mr. Pereira’s employment without cause and the purchase of his unvested shares at a very significant discount. In so doing, the application judge failed to consider Mr. Pereira’s expectations as one of the founders of this small company: see BCE, at paras. 74, 109. More fundamentally, he failed to apply the legal framework established in BCE.
[35] As reviewed above, in determining whether the court should grant an oppression remedy, the first part of the inquiry requires the court to determine the applicant’s expectations and whether they were reasonable: see also Menillo, at paras. 8-9. In this case, the application judge described Mr. Pereira’s expectations in terms that made them sound inherently unreasonable without looking at the context in which he held those expectations. The application judge then failed to consider whether Mr. Pereira’s expectations were reasonable having regard to the list of factors set out in BCE.
[36] The application judge described Mr. Pereira’s expectations in terms that made them sound unreasonable, without considering whether they could be described in more objectively reasonable terms given the factual context. In his affidavit, in addressing his understanding of the purpose of the vesting provisions, Mr. Pereira stated that he would “obviously be with the company well beyond three years”. In addition, when addressing the employment agreement, he stated that he expected his employment “would continue as long as [he] wanted” because he was the founder of the company and its majority shareholder. He also stated that he expected that he would remain an owner of the company unless he chose to leave, and that these are decisions that he and Mr. Paul would make together.
[37] Based on this evidence, the trial judge described Mr. Pereira’s expectation as being that he would be with the company indefinitely. The trial judge held that it was unreasonable for Mr. Pereira to expect to hold a position with TYLTGO indefinitely, given the wording of the stock purchase agreement. However, in focusing on Mr. Pereira’s expectation that he would be with TYLTGO indefinitely, the application judge failed to consider what this meant in the factual context of this case. It may be unreasonable for Mr. Pereira to expect that he would be with TYLTGO forever, but given his role as one of the founders of the company, it may not be unreasonable for Mr. Pereira to expect that he would continue as an officer, director and/or shareholder of TYLTGO for some period of time, at least until his shares fully vested, unless his continued role in TYLTGO was harmful to the corporation or not in the company’s best interests. While Mr. Pereira gave an indefinite temporal term to his expectation, at the very least the application judge should have considered whether it was objectively reasonable for Mr. Pereira to expect that he would continue in his role at TYLTGO until his shares were fully vested. In the circumstances, the trial judge should have sought to characterize Mr. Pereira’s expectations more narrowly in a manner consistent with the factual context, and to then assess whether they were objectively reasonable having regard to the factors enumerated in BCE.
[38] Instead, having characterized Mr. Pereira’s expectation as being that he would be with TYLTGO indefinitely, the application judge did not consider the factors referred to in BCE, at para. 72, in determining whether Mr. Pereira’s expectations were objectively reasonable. Rather, he focused on the language of the agreements between the parties, which is only one of the relevant factors.
[39] For example, as referred to above, he gave no consideration to Mr. Pereira’s role in founding TYLTGO and his history with the corporation. As held in BCE, at paras. 74 and 75, in considering the reasonableness of an applicant’s expectations, the size and nature of the corporation are relevant as is the relationship between the “claimant and the other corporate actors”. While TYLTGO was seeking to expand and obtain additional funding, it was nevertheless still a small corporation. Mr. Pereira was the founder of its predecessor, and one of two of its original founders. The application judge failed to consider these circumstances in deciding whether Mr. Pereira’s expectations were reasonable.
[40] Similarly, the application judge gave no consideration to whether the decision to remove Mr. Pereira as an officer and director and to divest him of his unvested shares was “the fair resolution of conflicting interests between corporate stakeholders”: BCE, at paras. 81-88. On the application, Mr. Pereira and Mr. Paul gave evidence regarding the circumstances leading to Mr. Pereira’s termination. There was conflicting evidence on this issue. Mr. Pereira disagreed that he had in any way acted improperly. In contrast, Mr. Paul gave a few examples of Mr. Pereira’s behaviour that he considered inappropriate. The application judge did not seek to resolve the conflicts in the evidence nor did he address the issue of whether there was any justification for Mr. Paul’s view that it was in TYLTGO’s best interest for Mr. Pereira to be dismissed from the company. Instead, as mentioned above, he simply said that there was no evidence that Mr. Paul, Mr. Sadhu and Mr. Hussein conspired to remove Mr. Pereira. However, as part of the inquiry of whether it was fair and reasonable to remove Mr. Pereira from his position and divest him of his shares, it was relevant to consider whether Mr. Pereira’s conduct justified such a termination. In other words, it was relevant to consider whether it was in the best interests of TYLTGO to divest Mr. Pereira of any further role in the company and of all his unvested shares.
[41] The failure to consider the size and nature of TYLTGO, the relationship between the parties, including Mr. Pereira’s role as a founder of the company, and whether Mr. Pereira’s termination and divestment were a fair resolution of the conflict between the parties are only examples of the factors the application judge failed to consider. They are not meant to be exhaustive, but are meant to demonstrate that the application judge erred in principle in his approach to determining whether the respondents’ conduct was oppressive and warranted a remedy.
[42] Ultimately, I would allow the appeal on the basis that the application judge erred in law in his application of the oppression remedy. Specifically, he improperly focused on whether the respondents’ conduct was lawful rather than on whether it was equitable, or, put differently, he failed to consider whether it was fair and reasonable in the circumstances of this case for Mr. Pereira to be removed as a director and for his shares to be bought back at a deeply discounted price. . Cormpilas v. 1490565 Ontario Limited
In Cormpilas v. 1490565 Ontario Limited (Ont CA, 2023) the Court of Appeal considered the 'business judgment rule' (a presumption of corporate good faith), here arising in an OBCA oppression remedy context:[41] With respect to the payment of various loans and liabilities by the corporation from the VTB proceeds prior to distribution to shareholders, the motion judge found that the decision to pay these outstanding liabilities of the Truckers Haven business was a reasonable corporate decision made by the directors at a directors meeting. The motion judge held that a court will not, and ought not, interfere with business decisions made by directors, unless it is established that the decision was not done honestly, in good faith, and in the best interests of the corporation. We understand this to be a reference to the “business judgment rule”, which accords deference to business decisions, so long as they lie within a range of reasonable alternatives: see BCE Inc. v. 1976 Debetureholders, 2008 SCC 69, [2008] 3 S.C.R. 560, at para. 40; 3716724 Canada Inc. v. Carleton Condominium Corporation No. 375, 2016 ONCA 650, at para. 48; Brant Investments Ltd. v. KeepRite Inc. (1991), 1991 CanLII 2705 (ON CA), 3 O.R. (3d) 289 (C.A.), at p. 320. The motion judge also held that the directors’ approval of the VTB distributions were not oppressive nor unfairly prejudicial of Ms. Cormpilas’ shareholdings and claims to loans for unpaid commissions or construction loans. . Bateni v. Jamali
In Bateni v. Jamali (Div Court, 2023) the Divisional Court commented on the OBCA oppression remedy:[44] Oppression proceedings that are based on the enforcement of prior contractual arrangements between the parties tend to be clearer than other oppression proceedings because the contract may inform the court’s decision as to the reasonable expectations of the parties: Itak International Corp. v. CPI Plastics Group Limited and Clark, [2006] O.J. No. 2637 (S.C.J.), at para. 47. . Bateni v. Jamali
In Bateni v. Jamali (Div Court, 2023) the Divisional Court considered whether parties were 'complainants' within the meaning of the oppression provisions of the OBCA [s.245,248]:The Trial Judge’s Finding that Mr. Bateni and 228 were Complainants
[36] The appellants submit that the trial judge made an extricable error of law by finding that Mr. Bateni and 228 had standing as “proper complainants” to pursue a claim of oppression under s. 248 of the OBCA.
[37] The oppression remedy in s. 248 of the OBCA is available to a complainant. Section 245 provides:“complainant” means,
(a) a registered holder or beneficial owner, and a former registered holder or beneficial owner, of a security of a corporation or any of its affiliates,
(b) a director or an officer or a former director or officer of a corporation or any of its affiliates,
(c) any other person who, in the discretion of the court, is a proper person to make an application under this Part. [38] The trial judge found that Mr. Bhateni, as an officer and director of Caledon Hills, and 228, as a shareholder of Caledon Hills, were complainants. The trial judge also found that because Mr. Jamali was the chairman, a director, and 51 per cent owner of Caledon Hills, and the majority owner and controlling mind of Caledon Chrysler, Caledon Hills and Caledon Chrysler were affiliates within the meaning of s. 1(4) of the OBCA.
[39] Both the appellants and the respondents rely on Fedel v. Tan, 2008 CanLII 46697 (ON SC), [2008] O.J. No. 3585, aff’d 2010 ONCA 473. In my view, Fedel supports the respondents, not the appellants. The Court of Appeal noted that in determining Fedel was a proper complainant under s. 245, the application judge found that Fedel had an equity or ownership interest in GPI, a conclusion amply supported by the evidence. The application judge properly considered all the circumstances relating to Tan and Fedel’s 14-year business relationship as it applied to the business operated by GPI. At para. 68, the Court of Appeal explained the broad discretion provided to the court under s. 245(c) of the OBCA:Section 245(c) provides a court with a broad discretion to determine who is a proper person to bring an application under s. 248. I am satisfied that the nature of Fedel and Tan’s relationship, as well as Fedel’s relationship with GPI provided ample basis for the application judge to exercise the broad discretion conferred on him by s. 245(c) to conclude that Fedel was a proper person to bring an application [citations omitted]. [40] The same is true in this case. Mr. Jamali promised Mr. Bateni an equity interest in a to-be-established corporation, in return for Mr. Bateni working in the business at a reduced salary. The trial judge found that Mr. Bateni did in fact serve as manager at North York Chrysler and then at the Bolton dealership at a reduced salary, up until the day that Mr. Jamali wrongfully terminated Mr. Bateni’s employment. Their working relationship collapsed when, as found by the trial judge, Mr. Jamali precipitated the rescission of the Caledon Hills letter of intent and acted in bad faith by submitting another application in the name of Caledon Chrysler without notice to Mr. Bateni and in breach of the Oral Agreement. As found by the trial judge, under the terms of the Oral Agreement, Mr. Bateni was entitled to 20 per cent of the shares in Mr. Jamali’s Bolton dealership, whatever corporate vehicle was ultimately used.
[41] The findings and conclusions of the trial judge were amply supported by the evidence. The trial judge properly considered Mr. Bateni and Mr. Jamali’s relationship, and the terms of the Oral Agreement, in determining that Mr. Bateni and 228 were proper persons within the meaning of s. 245(c) of the OBCA. There is no basis to interfere with the trial judge’s exercise of his discretion in this regard. . FNF Enterprises Inc. v. Wag and Train Inc.
In FNF Enterprises Inc. v. Wag and Train Inc. (Ont CA, 2023) the Court of Appeal considers the oppression remedy in the OBCA [s.248]:(3) The Oppression Remedy Claim
[31] There are two requirements for an oppression remedy claim under s. 248 of the OBCA to succeed. First, the complainant must identify the expectations it claims have been violated by the conduct at issue and show that those expectations were reasonably held. Second, the complainant must show that these reasonable expectations were violated by corporate conduct that was oppressive or unfairly prejudicial to or that unfairly disregarded the interests of any security holder, creditor, director, or officer: Wilson v. Alharayeri, 2017 SCC 39, [2017] 1 S.C.R. 1037, at para. 24.
[32] At issue in Wilson was when oppression remedy relief should be granted against an individual director personally, rather than simply against the corporation.
[33] The Supreme Court held that personal liability may be imposed on a director for oppressive conduct if two criteria are met: (1) the director has the requisite degree of involvement in the oppressive conduct so that it is attributable to them; and (2) personal liability is fit in the circumstances. An order against a director personally will be fit where it is a fair way of dealing with the situation, the order goes no further than necessary to rectify the oppression, the order serves only to vindicate the reasonable expectations of the complainant, and other forms of statutory and common law relief are not more fitting in the circumstances: Wilson, at paras. 47-55.
[34] In Wilson, the court identified the obtaining of a personal benefit by the director, or the director misusing a corporate power, as situations in which it would typically be fair to impose personal liability on the director: at para. 49.
[35] In the oppression remedy claim against Ms. Ross, the statement of claim alleges that the appellants are creditors whose interests are subject to protection under s. 248 of the OBCA, and that conduct of Ms. Ross was unfairly prejudicial to and unfairly disregarded the interests of the appellants, as it included “severe mismanagement of funds, self-dealing, and disregard for statutory and common law trust obligations”. Reading the pleading generously, those allegations should be read in light of the more specific pleadings and their gist relating to value stripping which I have excerpted above (at paras. 13-14). Even though they were asserted in relation to the claim to pierce the corporate veil, they should be read as though they applied to the oppression remedy claim as well.
[36] In deciding that the oppression remedy claim did not disclose a reasonable cause of action, the motion judge acknowledged that s. 248 of the OBCA gives the court “a broad discretion to fashion a remedy for creditors who are treated unfairly by corporations and their directors”. But he noted that: “[n]o particulars are given of mismanagement of funds, self-dealing and trust obligations. If [Ms.] Ross is the sole shareholder of the corporate defendant, presumably she is entitled to use its money as her own.” He also noted that the oppression remedy is not to be used to refashion a contract with a corporation to, in effect, make the directing mind of the corporation a personal guarantor of its obligations because it might seem just and equitable to do so after the fact. Where the complaint concerns a breach of contract, a contract action against the corporation is the remedy.
[37] In my view, the motion judge erred in principle in some of these conclusions.
[38] In J.S.M. Corporation (Ontario) Ltd. v. The Brick Furniture Warehouse Ltd., 2008 ONCA 183, 41 B.L.R. (4th) 51, at para. 66, Doherty J.A. distinguished between the situation of a creditor who could, but did not, protect itself from a risk it assumed when it entered into an agreement with a corporation, and “a creditor who finds his interest as a creditor compromised by unlawful and internal corporate manoeuvres against which the creditor cannot effectively protect itself. In the latter case, there is much more room for relief under the oppression provisions than in the former case” (emphasis added).
[39] In essence, the motion judge viewed the claim as falling within the first situation described in J.S.M. In my view, the claim actually falls within the second. The allegation that Ms. Ross stripped value from Wag and Train knowing of its liabilities is an allegation of unlawful and internal corporate manoeuvres against which the appellants, as creditors, could not effectively protect themselves.
[40] Contrary to the motion judge’s observation, in light of the allegation of unpaid amounts owing to creditors, Ms. Ross, as sole shareholder was not entitled to use Wag and Train’s money as her own or to appropriate its business. Nor could she, as sole director, confer either upon herself. The power of a director to declare a dividend to shareholders is subject to the corporation being able to pay its creditors: OBCA, s. 38(3). A shareholder of a corporation does not have a right to the corporation's assets while it is ongoing: BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, [2008] 3 S.C.R. 560, at para. 34. That right only arises if and when the corporation is wound up. On winding up, a shareholder’s right to payment or to receive assets is subject to the prior rights of unpaid creditors: OBCA, s. 221(1)(a).
[41] Accordingly, the appellants’ allegations – that Ms. Ross stripped value from Wag and Train to avoid payment of amounts known to be owing to the appellants – present an arguable case for a personal remedy against her under the oppression remedy relating to the stripped value. Although the appellants have not specifically alleged that they had a reasonable expectation that such conduct would not occur, reasonable expectations are objectively derived: BCE Inc., at para. 62. The prohibition on a director who is also a shareholder taking assets in priority to, and to the prejudice of, unpaid creditors is a statutory one. The appellants should have an opportunity to amend to address that deficiency.
[42] The allegations otherwise set out an arguable case that a personal remedy against Ms. Ross would be fit. She is alleged to have stripped value in priority to unpaid creditors and thus misused corporate powers to her own benefit, arguably making a personal remedy a fair way of dealing with the situation. The allegations arguably satisfy the other Wilson criteria for a personal remedy as well. Any lack of particularity should also be addressed by amendment. . Tahmasebi v. Hosseini
In Tahmasebi v. Hosseini (Div Court, 2022) the Divisional Court considers the nature of corporate oppression damages [under OBCA s.248(3)] (SS: I suggest you review the cited cases to understand this point fully):[45] With respect, I conclude that the trial judge erred in this aspect of his award. His task, having found oppression, was to provide an appropriate remedy for the oppression he had found. Pursuant to s. 248(3) of the OBCA, the trial judge had a broad discretion in determining the remedy. However, as he noted at para. 77, “[t]he Court must strive to fashion a remedy that is minimally intrusive and as consistent as possible with the reasonable expectations of the parties.” See as well Naneff v. Con-Crete Holdings Ltd. (1995), 23 O.R. (3d) 48 (C.A.), paras. 22 and 27; Wilson v. Alharayeri, 2017 SCC 39, paras. 45, 53 and 54. . Abbasbayli v. Fiera Foods Company
In Abbasbayli v. Fiera Foods Company (Ont CA, 2021) the Court of Appeal considered the application of the s.248 OBCA oppression provisions to an employee suing from wrongful dismissal and related employment claims (under the argument that he was a "creditor" to the corporation). A substantial theme was that the employee sought oppression remedies against not only the corporation, but against the director's personally:(c) The Section 248 OBCA Claim
[36] The appellant is seeking relief under s. 248 of the OBCA against the individual respondents as part of his wrongful dismissal action. Section 248 provides a “complainant” with a remedy for “oppression” – conduct that is “oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer of the corporation”. “Complainant” is defined at s. 245 as (a) a registered holder or beneficial owner, and a former registered holder or beneficial owner, of a security of a corporation or any of its affiliates, (b) a director or an officer or a former director or officer of a corporation or of any of its affiliates, or (c) any other person who, in the discretion of the court, is a proper person to make a s. 248 application.
[37] The s. 248 OBCA claim is asserted at paras. 56-61 of the statement of claim under the heading “Director’s Liability”. As already noted, these paragraphs seek to hold the individual respondents liable for various kinds of damages, relying in part on the statutory claims. The appellant alleges at para. 56 that the individual respondents “used their directorial powers oppressively by directing Fiera to dismiss [him] for cause”, and at para. 57 he pleads that they “exercised the powers of directors in an oppressive manner, without legal or moral justification, and as such are jointly and severally liable for the aforementioned claims pursuant to sections 131 and, inter alia, 248 of the [OBCA].” At para. 59 he pleads that the individual respondents did not carry out their duties in good faith when they failed to instruct Fiera to remit the wages owing to him before the dismissal, made the decision on behalf of Fiera to dismiss him without notice or compensation, and did not issue him a record of employment. He pleads at para. 60 that he “remains a creditor and complainant of Fiera pursuant to the [OBCA]” and at para. 61 he pleads that the individual respondents are “liable for all compensation and damages sought against Fiera, jointly and severally”, that are claimed in his prayer for relief.
[38] The respondents sought to strike the appellant’s s. 248 claim under r. 21.01(1)(b). The motion judge, in supplementary reasons, struck the oppression claim with leave to amend, observing that the respondents had provided the appellant with a roadmap of what is required to fix the pleading. On the motion to strike, the respondents had submitted that the appellant did not have standing to make the claim, that he did not plead what the reasonable expectations were or what the conduct was of the defendant directors which disregarded his reasonably held expectations, and that he did not plead that the directors’ conduct affected his ability to recover judgment against the corporate defendants. It appears that the motion judge may have been referring to these arguments on the motion to strike as the “roadmap” guiding the appellant on how to fix his pleadings.
[39] The appellant argues that the motion judge erred in striking the s. 248 OBCA oppression claim, as he had pleaded the necessary material facts, and in failing to provide an explanation for striking the claim.
[40] The respondents argue that the motion judge correctly struck the s. 248 OBCA oppression claim as the appellant does not have standing to advance such a claim and has failed to plead that the conduct of the directors disregarded his reasonable expectations. The respondents however did not cross-appeal the motion judge’s refusal to strike the s. 248 claim without leave to amend.
[41] The motion judge did not err in striking the oppression claim under s. 248 of the OBCA with leave to amend.
[42] I begin by noting that wrongful dismissal by itself will not usually justify a finding of oppression; nor is a terminated employee always a “complainant” who has standing to bring an oppression proceeding under s. 248 of the OBCA. Typically, oppression claims that are asserted in the context of wrongful dismissal are made by shareholder employees whose interests have been unfairly disregarded: see e.g. Walls v. Lewis (2009), 2009 CanLII 31983 (ON SC), 97 O.R. (3d) 16 (S.C.). Claims have been asserted successfully by non-shareholder employees where a director’s conduct has prevented the corporate employer from paying wages or wrongful dismissal damages: see e.g. Churchill v. Aero Auction Sales, 2019 ONSC 4766, 147 O.R. (3d) 44 (the director, also the plaintiff’s former common law spouse, withheld wages, terminated her employment, caused the corporation to cease operations, and transferred its assets to a related corporation); Downtown Eatery (1993) Ltd. v. Ontario (2001), 2001 CanLII 8538 (ON CA), 200 D.L.R. (4th) 289 (Ont. C.A.), leave to appeal refused, [2001] S.C.C.A. No. 397 (directors caused the company to go out of business and transferred its assets to related companies they owned and operated a few months before a scheduled wrongful dismissal trial). Similarly, such a claim was permitted to proceed as part of a proposed class proceeding in Brigaitis v. IQT, Ltd. c.o.b. as IQT Solutions, 2014 ONSC 7, 22 B.L.R. (5th) 297, at paras. 90-99, where it was alleged that the directors had diverted funds for personal use before the corporation terminated the employment of employees, leaving insufficient funds to pay termination pay and other amounts.
[43] It is not sufficient for a terminated employee, as here, to plead that the individual defendants acted oppressively as directors of the corporate defendants, and to claim all of their damages against such individuals, relying on s. 248 of the OBCA. Nor is it sufficient to allege that the directors directed the appellant’s termination, or that they failed to ensure that he received a record of employment.
[44] The necessary elements of an oppression claim were recently articulated by the Supreme Court in Wilson v. Alharayeri, 2017 SCC 39, [2017] 1 S.C.R. 1037. First, the complainant must identify the reasonably held expectations they claim to have been violated by the conduct at issue. Second, the complainant must show that these reasonable expectations were violated by corporate conduct that was oppressive or unfairly prejudicial to or that unfairly disregarded the interests of any security holder, creditor, director or officer of the corporation: at para. 24. The Supreme Court in Wilson also observed that to impose personal liability, there must be oppressive conduct that is properly attributable to the director’s implication in the oppression and the imposition of personal liability must be fit in all the circumstances: at paras. 47-48.
[45] The appellant did not address these elements in his pleading. He did not plead his reasonable expectations of the directors or that those reasonable expectations were violated by oppressive corporate conduct. The appellant’s reasonable expectations cannot simply be inferred from his pleadings of what the directors did or failed to do. As such, there were insufficient material facts in the statement of claim to establish a claim for oppression under s. 248 of the OBCA.
[46] I would therefore uphold the motion judge’s order striking the s. 248 claim with leave to amend. Before leaving this ground of appeal however I would observe that nothing in these reasons is intended to determine whether a claim for an oppression remedy is appropriate in the circumstances of this case, whether the appellant would have standing as a “complainant” (which is in the discretion of the court), or even whether, having been granted leave to amend his pleadings, the appellant will be able to plead the facts that are necessary to seek an oppression remedy against the individual respondents under s. 248.
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