Shareholder Disputes, Oppression Remedy, and Liability of Directors and Officers

David Alderson, LL.B, LL.M (Commercial and Corporate), Q.Arb, Lawyer and ArbitratorArbitration, Business Law, Business Litigation, Commercial, Commercial Arbitration, Commercial List Matters, Commercial Litigation, Corporate Litigation, Directors' and Officers' Liability, Family Business Disputes, Partnership Dispute, Partnerships and Shareholder Disputes, Professions, Shareholder Disputes0 Comments

Our lawyers have acted in Ontario and other jurisdictions for small, mid-sized and large Ontario and Canadian corporations, shareholders, directors, officers, executives and creditors in corporate disputes and shareholder disputes. We have acted in both oppression remedy action and derivative actions. Oppression Remedy The oppression remedy is a mechanism in the Ontario Business Corporations Act and the Canada Business Corporations Act to protect the interests of shareholders and stakeholders in a corporation against wrongful conduct.  Whether the Ontario or Canada Act will apply depends on the jurisdiction in which the corporation was incorporated. The oppression remedy can be used to protect the interests of shareholders, directors, officers or creditors against the acts of other shareholders, the board of directors or other affiliates of the corporation. The oppression remedy can be used to protect the interests of shareholders, directors, officers or creditors against the acts of other shareholders, the board of directors or other affiliates … Read More

Partnership Disputes Between Professionals – Dentists, Doctors, Accountants, Lawyers, Architects and Engineers

David Alderson, LL.B, LL.M (Commercial and Corporate), Q.Arb, Lawyer and ArbitratorArbitration, Breach of Non-Competition Clause, Breach of Non-Solicitation Agreement, Business Litigation, Commercial Arbitration, Commercial Contracts, Commercial Litigation, Joint Venture Disputes, Non-Competition Agreement, Non-Competition Clause, Non-Solicitation Agreement, Non-Solicitation Clause, Partnership Dispute, Partnerships and Shareholder Disputes, Professional Services0 Comments

Partnerships Professionals often carry on their professional practice as partners in a partnership or limited liability partnership. Partnerships can be created simply by conduct and the application of the Partnership Act or by a simple or complex partnership agreement. Joint Venture Contract – Fiduciary Duties? In other cases professionals associate in practice by participation in a contractual joint venture which, depending on the agreement and the circumstances, may or may not at law also be a partnership but, in any event, may attract the duties and obligations of partners, including fiduciary duties. Sharing Space Lastly, some professionals may consider that they are only sharing space with other professional and may be very surprised to find that the arrangement gave rise at law to unexpected obligations. Duty of Honest Performance The recent decision of the Supreme Court of Canada in Bhasin v. Hrynew, though not a case about partnerships, nonetheless has a wide-ranging impact … Read More

Shareholders’ Remedies under the OBCA: An Overview (Part 2/2) 

Janice Perri, B.A. (Summa Cum Laude)Business Law, Business Litigation, Civil Litigation, Closely-Held Business Disputes, Commercial, Commercial and Contract Litigation, Commercial Contracts, Commercial Law, Commercial Litigation, Corporate Disputes, Corporate Litigation, Directors' and Officers' Liability, Oppression Remedies, Partnership Dispute, Partnerships and Shareholder Disputes, Shareholder Disputes0 Comments

When a shareholder’s rights are breached, there are a variety of legal remedies available under the Ontario Business Corporations Act (“OBCA”). For more information on shareholders’ rights, please click here to see part 1 of this post. Oppression Remedy It is first important to note that as per the Ontario Court of Appeal decision Maurice v. Alles, the standard two-year limitation period set out in the Limitations Act applies to oppression remedy claims. The “clock starts to run” when the oppressive conduct first began, meaning that individuals must not delay if they wish to pursue an oppression remedy. The oppression remedy under s. 248 of the OBCA is broad in nature, and there is a large amount of judicial discretion afforded in its application. The oppression remedy can be an especially strong tool in protecting minority shareholders. When the Court determines that there has been oppressive conduct, unfairly prejudicial conduct, or conduct that disregards the interests of any shareholder it may make an order to resolve the matter in a variety of ways. … Read More

Shareholders’ Rights under the OBCA: An Overview (Part 1/2) 

Janice Perri, B.A. (Summa Cum Laude)Business Law, Business Litigation, Civil Litigation, Closely-Held Business Disputes, Commercial, Commercial and Contract Litigation, Commercial Contracts, Commercial Law, Commercial Litigation, Corporate Disputes, Corporate Litigation, Directors' and Officers' Liability, Oppression Remedies, Partnerships and Shareholder Disputes, Shareholder Disputes0 Comments

Under the Ontario Business Corporations Act (“OBCA”), shareholders of a corporation have a variety of rights. Outlined below are a few rights that all shareholders should be aware they possess. Please click here to see part 2 of this post on shareholders’ remedies. Voting Rights The board of directors, under s. 115 are ultimately responsible for managing or supervising the management of the business and affairs of a corporation. Major business decisions also involve the participation of the board of directors, though sales, leases, or exchanges of all or substantially all the property of the corporation that is not in the ordinary course of business requires the approval of shareholders (s. 184(3)). Shareholders also have voting rights that allow them to control the makeup of the board of directors (s. 119(4)), and also the ability to remove directors under s. 122(1) (though this is subject to exceptions under s. 120(f)). Shareholders have additional voting rights under … Read More

Court of Appeal Reiterates Importance of Pleading Particulars of Fraud

Andrew Ottaway, B.A. (Hons.), LL.B.Appeals, Appellate Advocacy, Civil Litigation, Contract Disputes, Fraud, Partnerships and Shareholder Disputes0 Comments

In Midland Resources Holding Limited v. Shtaif, 2017 ONCA 320, the trial judge found the appellants liable to a company’s shareholders for fraudulent misrepresentations before and after an initial public offering (IPO).  On appeal, the appellants argued that the trial judge erred in finding liability based on the IPO-related statements because the respondents did not plead or argue at trial that such statements amounted to fraudulent misrepresentations. The Court of Appeal stated that a pleading of fraud or misrepresentation must set out with careful particularity the elements of the misrepresentation relied upon, including: the alleged misrepresentation itself; when, where, how, by whom and to whom it was made; its falsity; the inducement; the intention that the plaintiff should rely upon it; the alteration by the plaintiff of his or her position relying on the misrepresentation; the resulting loss or damage to the plaintiff; and if deceit is alleged, an allegation … Read More

Court Refuses to Authorize Shareholder Buyout in Absence of Oppression

Robert Kalanda, B.A. (Hons.), J.D.Commercial Litigation, Partnerships and Shareholder Disputes0 Comments

The Ontario Business Corporations Act provides a wide range of remedies to a person affected by the actions of a corporation or its directors that are found to be oppressive, unfairly prejudicial, or unfairly disregard the interests of that person. Most commonly, these remedies are sought by minority shareholders when actions are taken or threatened that would unfairly hurt their interests. One of those remedies is to direct the corporation, or any other person, to purchase the shares of the complainant. This remedy essentially allows shareholders to be relieved of their shares for a fair price, leaving the corporation and its remaining shareholders to carry on without further complaint from the complainant. However, this remedy does not create a free-standing right for a shareholder of a privately-held corporation to force the sale of his or her shares for any reason. This principle was recently confirmed in Wilfred v Dare et al. In that case, the complainant sought … Read More

Supreme Court Considers Oppression Remedy

Andrew Ottaway, B.A. (Hons.), LL.B.Appeals, Appellate Advocacy, Civil Litigation, Commercial, Commercial Litigation, Contract Disputes, Partnerships and Shareholder Disputes0 Comments

In Mennillo v. Intramodal inc., 2016 SCC 51, the Supreme Court of Canada addressed the application of the oppression remedy under the Canada Business Corporations Act (“CBCA”), which applies to federally incorporated companies.  (The Ontario Business Corporations Act, which applies to Ontario incorporated companies, also contains an oppression remedy). The case involved a private corporation with originally two shareholders.  There was no shareholders’ agreement.  The Court described the parties’ dealings as being “marked by extreme informality”.  One of the two shareholders, Mennillo, eventually resigned as officer and director of the company by providing a notice of resignation.  The notice did not address his status as a shareholder.   There was conflicting evidence from the parties about whether Mennillo intended to cease being a shareholder.  Ultimately, the trial judge accepted that Mennillo’s withdrawal from the company included his intention to no longer guarantee the company’s debts.  The trial judge found that Mennillo agreed … Read More

Family Business Dispute, Start Up Company Dispute, and Closely-Held Company Litigation

David Alderson, LL.B, LL.M (Commercial and Corporate), Q.Arb, Lawyer and ArbitratorBusiness Litigation, Civil Litigation, Closely-Held Business Disputes, Commercial Arbitration, Commercial Litigation, Contract Disputes, Directors' and Officers' Liability, Family Business Disputes, Injunction & Specific Performance, Oppression Remedies, Partnerships and Shareholder Disputes, Shareholder Disputes, Start-Up Disputes0 Comments

We have experience acting for, advising and representing those in closely-held company litigation, both arising from family business disputes and from start-up company disputes. Family Business Disputes Many businesses in Canada are family businesses or have evolved from family businesses. Family businesses present many unique challenges as they grow, as key members of the company or partnership leave the family business, or when personal relationships of the key members of the family business change or deteriorate. One of the most common differences between a family business and other established businesses, whether or not a shareholders’ agreement, partnership agreement and other legal documentation was used in the formation of the family business, is the informality in operation of the family business, including the often ignored distinction in fact between employees, shareholders, or partners – since family members take on multiple roles. Please see our webpage on Family and Closely Held Business Disputes. Start Up Company … Read More

Partnership Disputes & Joint Venture Litigation

David Alderson, LL.B, LL.M (Commercial and Corporate), Q.Arb, Lawyer and ArbitratorArbitration, Civil Litigation, Closely-Held Business Disputes, Commercial, Commercial Arbitration, Commercial Law, Commercial List Matters, Commercial Litigation, Contract Disputes, Contract Termination, Directors' and Officers' Liability, Family Business Disputes, Joint Venture Disputes, Partnership Dispute, Partnerships and Shareholder Disputes, Shareholder Disputes, Start-Up Disputes0 Comments

Our lawyers have acted in Ontario and other jurisdictions for partners in small and mid-sized partnerships, and limited liability partnerships (LLPs) and contractual parties and partners in joint ventures. Partnership Disputes Partnership is a relationship between persons carrying on a business in common with a view to profit, which is not a corporation. It is one of the most commonly used business associations for small and medium-sized business. A partnership can be created at law and the Partnerships Act, R.S.O. 1990, c. P.5 sets out rules for determining existence of partnership, though commonly the parties enter into a partnership agreement. Joint Venture – Is it a Partnership? Joint ventures are often established to synergize what each member of the joint venture can add to the consortium. Sometimes a joint venture is the structure chosen because those members engaged in the joint venture are located in different jurisdictions. While invariably created by contractual agreement, some … Read More

Business Dirty Tricks: Unfair Competition: Intentional Interference, Inducing Breach of Contract, Conspiracy and Defamation

David Alderson, LL.B, LL.M (Commercial and Corporate), Q.Arb, Lawyer and ArbitratorAppropriation of Personality, Business Litigation, Business Torts | Economic Torts, Civil Litigation, Commercial, Commercial and Contract Litigation, Commercial Arbitration, Commercial Law, Commercial Litigation, Contract Disputes, Contract Termination, Cross-Border Litigation, Cyber Risks, Fraud, Injunction & Specific Performance, Intellectual Property, Of Interest to US Counsel, Partnerships and Shareholder Disputes, Passing Off, Trademark Infringement0 Comments

Sometimes businesses and their stakeholders act wrongfully in seeking to advance their interests and / or harm competitors. There are often reports of the “dirty tricks” used by those in business to seek to destroy, defeat or diminish the effectiveness of a competitor. These are often unethical tactics, but sometimes such conduct is also wrongful and has been recognized by the common law as actionable in the courts for damages or injunctive or other urgent equitable relief, or prohibited by a statute which provides for a civil monetary remedy or grounds for an injunction. These causes of action have been recognized and provide the basis of lawsuits for harm, loss and damage, and in suitable circumstances, grounds for an immediate injunction or mandatory order prohibiting the further commission of the wrongful acts. In short, wrongful intentional acts causing harm, loss or damage to businesses or their stakeholders may give rise to a cause of action in common law business torts (the so-called … Read More

Court Stays Arbitration but Denies Costs to Successful Party for “Blameworthy Conduct”

Andrew Ottaway, B.A. (Hons.), LL.B.Arbitration, Civil Litigation, Commercial Arbitration, Commercial Litigation, Contract Disputes, Contract Termination, Partnerships and Shareholder Disputes0 Comments

In Gorman v Kosowan, 2016 ONSC 5085, the applicant commenced a proceeding regarding a business dispute. The applicant and individual respondent were joint owners of a transportation and warehouse business.  A dispute arose between them.   The respondents subsequently terminated the applicant’s employment and excluded him from the business.  The applicant sought relief from the allegedly oppressive conduct under the Canada Business Corporations Act and the Ontario Business Corporations Act.  The respondents brought a motion to stay the oppression application based on an arbitration clause in the parties’ Unanimous Shareholders’ Agreement (“USA”). The USA arbitration clause required arbitration for “disputes under” the USA. The Judge found that the applicant’s claims were covered by the arbitration clause and granted the respondents’ motion to stay the application. In the Judge’s subsequent costs decision, here, the Judge denied the respondents’ request for costs of the motion.  While a winning party is typically entitled to its costs … Read More

Joint Venture Disputes and International Joint Venture Arbitration

David Alderson, LL.B, LL.M (Commercial and Corporate), Q.Arb, Lawyer and ArbitratorArbitration, Commercial Arbitration, Contract Disputes, Cross-Border Litigation, Enforcement of Foreign Arbitral Awards, International Distribution, International Joint Venture, International Sale of Goods, International Traders, Joint Venture Disputes, Jurisdictional Challenges, Of Interest to US Counsel, Partnership Dispute, Partnerships and Shareholder Disputes0 Comments

Joint ventures are often established to synergize what each member of the joint venture can add to the consortium. Sometimes a joint venture is the structure chosen because those members engaged in the joint venture are located in different jurisdictions, a consideration which may be pivotal for its success. While invariably created by contractual agreement, some joint ventures have been held by the courts to be a partnership, while others have been determined to be merely contractual, without comprising a partnership. A myriad of considerations have been used by the courts in determining whether a joint venture is a partnership. Issues have also arisen concerning the management and operational structure of a joint venture and whether such structure necessarily results in the joint venture being found to comprise a partnership. Historically the distinction between partner and contractor has been important, since the law only imposed a fiduciary duty upon partners, and not … Read More

Partnership and Contractual Disputes between Professionals (Dentists, Doctors, Accountants, Lawyers, Architects, Engineers)

David Alderson, LL.B, LL.M (Commercial and Corporate), Q.Arb, Lawyer and ArbitratorArbitration, Business Litigation, Business Torts | Economic Torts, Civil Litigation, Commercial, Commercial and Contract Litigation, Commercial Arbitration, Commercial Litigation, Contract Disputes, Contract Termination, Debt and Enforcing Judgments, Injunction & Specific Performance, Joint Venture Disputes, Partnership Dispute, Partnerships and Shareholder Disputes, Professions0 Comments

Partnerships Professionals often carry on their professional practice as partners in a partnership or limited liability partnership. Partnerships can be created simply by conduct and the application of the Partnership Act or by a simple or complex partnership agreement. Joint Venture Contract – Fiduciary Duties? In other cases professionals associate in practice by participation in a contractual joint venture which, depending on the agreement and the circumstances, may or may not at law also be a partnership but, in any event, may attract the duties and obligations of partners, including fiduciary duties. Sharing Space Lastly, some professionals may consider that they are only sharing space with other professional and may be very surprised to find that the arrangement gave rise at law to unexpected obligations. Duty of Honest Performance The recent decision of the Supreme Court of Canada in Bhasin v. Hrynew, though not a case about partnerships, nonetheless has a wide-ranging impact … Read More

David Alderson, Panelist on Law Society of Upper Canada Annotated Partnership Agreement 2015 CDP

David Alderson, LL.B, LL.M (Commercial and Corporate), Q.Arb, Lawyer and ArbitratorBusiness Litigation, Closely-Held Business Disputes, Contract Termination, Cross-Border Litigation, International Joint Venture, Joint Venture Disputes, Partnership Dispute, Partnerships and Shareholder Disputes, Wrongful Dismissal0 Comments

David Alderson, of Gilbertson Davis LLP, will be a panelist at the Law Society of Upper Canada Continuing Professional Development program, The Annotated Partnership Agreement 2015, on September 29, 2015 (alternate date, November 20, 2015) on the panel entitled “Review of the Differences (Legal and Drafting) Between a Partnership and a Joint Venture – Understanding the Significant Consequences”. Moderator of the panel (and Chair of the program) is Alison Manzer, Cassels Brock & Blackwell LLP and co-panelist is Sunita Doobay, TaxChambers LLP. David Alderson, LL.B (Osgoode), LL.M (Lond.) is a commercial litigator with Toronto insurance and commercial litigation firm Gilbertson Davis LLP. He holds a Master of Laws degree in commercial and corporate law and has been admitted to practice in England & Wales, Bermuda and New York State, as well as Ontario. David has practised local law in England, Bermuda, Dubai and Ontario, in diverse business and commercial litigation practice … Read More

Oppression Actions vs. Derivative Actions under the OBCA

Robert Kalanda, B.A. (Hons.), J.D.Commercial Law, Commercial Litigation, Partnerships and Shareholder Disputes0 Comments

The Ontario Business Corporations Act (OBCA) provides broad remedial options for directors, officers, shareholders, and other “complainants” to correct oppressive or prejudicial actions by or against a corporation. Most commonly, these take the form of either an oppression action or a derivative action. Oppression actions are where a complainant commences an action where that individuals interests have been oppressed or unfairly prejudiced. Derivative actions, on the other hand, are where a complainant starts litigation in the name of the corporation where the corporation has been wronged and the corporation (by its board of directors) chooses not to commence litigation itself. Because derivative actions bring the corporation into litigation without its consent, and often require the corporation to pay the legal costs of that action, leave of the court is required to commence a derivative action. Tersigni v. Georgevitch OBCA actions, and in particular oppression actions, can sometimes blur the legal distinction between … Read More

Gilbertson Davis LLP News – OsgoodePD Program on Shareholder Litigation and the Closely-Held Company

David Alderson, LL.B, LL.M (Commercial and Corporate), Q.Arb, Lawyer and ArbitratorBusiness Litigation, Business Torts | Economic Torts, Closely-Held Business Disputes, Commercial and Contract Litigation, Commercial Arbitration, Commercial Litigation, Contract Disputes, Directors' and Officers' Liability, Family Business Disputes, Gilbertson Davis LLP News, Injunction & Specific Performance, International Joint Venture, Oppression Remedies, Partnerships and Shareholder Disputes, Shareholder Disputes0 Comments

David Alderson, of Gilbertson Davis LLP attended as a faculty member of the OsgoodePD professional development program on April 7, 2015 concerning Shareholder Litigation and the Closely-Held Company. He was on the panel addressing Ethical and Professional Issues in Shareholder Disputes and Litigation. Osgoode Hall Law School said of this professional development program, “This OsgoodePD program brings together some of the country’s top commercial litigators and other experts to provide insight into key aspects of litigating these cases.”  Shareholders disputes are one of the most common and most complex disputes handled by commercial litigators and in-house counsel. The panel on Ethical and Professional Issues in Shareholder Disputes and Litigation included Paul N. Feldman of Feldman Lawyers, Tom Curry of Lenczner Slaght Royce Smith Griffin LLP and David Alderson of Gilbertson Davis LLP, with Lisa C. Munro of Lerners LLP moderating. The program is being re-broadcast on May 22, 2015 as described here. David Alderson has experience in shareholder and partnership disputes, both in arbitration … Read More

Court of Appeal on Restrictive Covenant on Dissolution of Partnership

David Alderson, LL.B, LL.M (Commercial and Corporate), Q.Arb, Lawyer and ArbitratorBusiness Litigation, Civil Litigation, Commercial and Contract Litigation, Commercial Litigation, Contract Disputes, Contract Termination, Joint Venture Disputes, Partnership Dispute, Partnerships and Shareholder Disputes0 Comments

The Court of Appeal for Ontario released its decision on February 11, 2014, in  Greenaway v Sovran 2014 ONCA 110 on the appeal by a “withdrawing” partner  of a two-member firm from the decision of the Superior Court of Justice on an application to determine the enforceability of a “restrictive covenant” in their partnership agreement. The application judge found that the two-member firm partnership had been dissolved and declared the restrictive covenant unenforceable as a penalty, but directed a trial of an issue to determine the damages payable by the appellant as a result of a breach of the portion of the portion of the covenant he found valid and severable – the withdrawal having triggered a clause in the agreement which called for the reduction of the withdrawing partner’s capital account “by 500% of the average fees billed by the firm to clients who transfer to the withdrawing partner within 24 … Read More