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Corporations - Oppression Remedy (3). 1417217 Ontario Inc. v. River Trail Estates Inc. [accounting]
In 1417217 Ontario Inc. v. River Trail Estates Inc. (Ont CA, 2024) the Ontario Court of Appeal allowed an appeal from a ruling involving oral real estate joint venture and several related issues.
Here, in a corporation oppression context, the court supports an 'accounting of profits' order where the oppression harm lay in "deficiencies in ... accounting records":ISSUE 1 - The trial judge did not err in ordering an accounting to remedy the oppression she found
[35] A trial judge has a broad discretion to make “any interim or final order it thinks fit” to remedy a finding of oppression: Business Corporations Act, R.S.O. 1990, c. B. 16, at s. 248(3). An appellate court reviewing that exercise of discretion, may interfere only where it has been established that the lower court erred in principle or its decision is otherwise unjust: Naneff v. Con-Crete Holdings Ltd. (1995), 1995 CanLII 959 (ON CA), 23 O.R. (3d) 481, at pp. 486-87; Murray v. Pier 21 Asset Management Inc., 2021 ONCA 424, 156 O.R. (3d) 197, at para. 34. The purpose of the oppression remedy is to rectify the oppression as found by the trial judge.
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[38] As for the accounting remedy, I see no basis justifying appellate intervention with it. In this case, the trial judge found that deficiencies in Mr. Suleman’s accounting records post-2008 created prejudice for the Joint Venture and, therefore, were oppressive. She ordered an accounting to rectify the oppression that she had found. She made no error in principle nor is the remedy unjust. Without an accounting, the claim and counterclaim cannot be fairly decided. This point is underscored by that fact that, at trial, both the Respondents and the Appellants sought an accounting. In the circumstances, it scarcely lies in the Appellants’ mouths to find fault with the trial judge for ordering an accounting. . Crescent Limited v. Jones
In Crescent Limited v. Jones (Div Court, 2024) the Divisional Court considered the nature of the oppression remedy [here under BCA s.248]:[42] The second problem with Crescent’s argument is that it fails to adequately recognize that the point of the oppression remedy is to validate the reasonable expectation of the parties. Further, where the parties have turned their minds in an agreement to those reasonable expectations, that is the appropriate remedy. As put in Itak International Corp. v. CPI Plastics Group Ltd., [2006] O.J. No. 2637 (Ont. Sup. Ct.):[45] The touchstone used by the courts for identifying conduct that satisfies the language of s. 248 and oppression remedy has been the “reasonable expectation of the shareholder”.
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[47] Agreements between the parties tend to constitute the best evidence of the parties’ reasonable expectations. Oppression proceedings that are based on the enforcement of the prior contractual arrangements tend to be clearer than other such proceedings in that such contracts may inform the Court’s decision as to the reasonable expectation of the parties. . Crescent Limited v. Jones
In Crescent Limited v. Jones (Div Court, 2024) the Divisional Court considered the SOR applicable to corporate oppression remedies [under OBCA s.248(3)]:[38] In assessing Crescent’s position on this point, it is important to keep in mind the standard of review that is applicable to a trial judge’s oppression remedy decisions. As put by the Ontario Court of Appeal in Naneff v. Con-Crete Holdings Ltd., 1995 CanLII 959 (ON CA), 23 O.R. (3d) 481, at para. 18:[18] Before discussing the merits of the challenge to this remedy, I wish to make a brief reference to the principles which guide an appellate court in its review of a remedy ordered under s. 248(3) of the O.B.C.A. Section 248(3) empowers a court upon finding of oppression to make any order “it thinks fit”. When that broad discretion is given to a court of first instance, the law is clear that an appellate court’s power of review is quite limited. In Mason v. Intercity Properties Ltd. (1987), 1987 CanLII 173 (ON CA), 59 O.R. (2d) 631 at p. 636, 38 D.L.R. (4th) 681 (C.A.), Blair J.A. set out the governing principle: The governing principle is that such a discretion must be exercised judicially and that an appellate court is only entitled to interfere where it has been established that the lower court has erred in principle or its decision is otherwise unjust. . 1261271 B.C. Ltd. v. Hanover PV Limited Partnership
In 1261271 B.C. Ltd. v. Hanover PV Limited Partnership (Ont CA, 2024) the Ontario Court of Appeal dismissed an appeal against the granting of oppression relief:[1] The appeal is dismissed. The application judge did not commit a reversible error, in our view, in finding that the granting of the impugned security interest was oppressive to the respondents.
[2] In FNF Enterprises Inc. v. Wag and Train Inc., 2023 ONCA 92, at para. 31, this court summarized the two requirements for an oppression remedy claim. Although the experienced commercial application judge did not cite caselaw on oppression, his findings show he was alive to these requirements.
[3] As stated in FNF Enterprises, a party seeking an oppression remedy must first “identify the expectations it claims have been violated by the conduct at issue and show that those expectations were reasonably held.” The application judge found that the respondents put the appellant’s predecessor in interest on notice that it did not have “carte blanche to do as it wished” with respect to the respondent entities. This amounts to a finding of an expectation that the appellant’s predecessor would not engage in conduct that was prejudicial to them. Given Gilmore J.’s 2022 order and the findings underlying it, this expectation was reasonable.
[4] Second, a party claiming an oppression remedy must show that its reasonable expectations were “violated by corporate conduct that was oppressive or unfairly prejudicial to or that unfairly disregarded the interest of any security holder, creditor, director, or officer” (FNF Enterprises, at para. 31). The application judge found that the impugned security was granted “in admitted self-interest”, “with a view to prejudicing” the parties which rightfully should have controlled the respondents at the time, by making already-existing debt “secured and subject to the rights granted … pursuant to the terms of the 2021 Security”.
[5] Based on the application judge’s findings, he had a sufficient basis to conclude that the granting of the impugned security was oppressive. This was in turn a sufficient ground to grant the application, independent of the application judge’s other bases for doing so. . Baylin Technologies Inc. v. Gelerman
In Baylin Technologies Inc. v. Gelerman (Ont CA, 2021) the Court of Appeal considered a corporate oppression remedy:(3) Oppression
[47] The application judge moved from his conclusions regarding the Baylin majority voting policy to the issue of oppression. He concluded that both Gelerman and Spacebridge had a reasonable expectation that Gelerman would be a director for the two-year period of the earn-out. He then concluded that Baylin’s actions in adopting the majority voting policy were “misleading and false” and that the policy was drafted for the purpose of removing Gelerman as a director.
[48] The application judge’s finding regarding the reasonable expectations of Gelerman and Spacebridge are findings of fact that are entitled to deference from this court. They may only be interfered with if a palpable and overriding error is demonstrated.
[49] In my view, Baylin has demonstrated such an error. I begin with the fact that reasonable expectations are to be viewed on an objective, not subjective, basis. As the Supreme Court of Canada said in BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, [2008] 3 S.C.R. 560, at para. 62:As denoted by "reasonable", the concept of reasonable expectations is objective and contextual. The actual expectation of a particular stakeholder is not conclusive. In the context of whether it would be "just and equitable" to grant a remedy, the question is whether the expectation is reasonable having regard to the facts of the specific case, the relationships at issue, and the entire context, including the fact that there may be conflicting claims and expectations. ....
[51] .... As a general proposition, it will be difficult for a party to advance that it had a reasonable expectation regarding a particular result that is above and beyond that for which the party negotiated: Casurina Limited Partnership v. Rio Algom Ltd. (2004), 2004 CanLII 30309 (ON CA), 181 O.A.C. 19, at para. 26.
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