In the recent decision of the Ontario Court of Appeal (“ONCA”), Pereira v. TYLT Technologies Inc. (TYLTGO), 2023 ONCA 682, the appellant successfully appealed a judgment dismissing his application for an oppression remedy under the Canada Business Corporations Act, RSC 1985, c C-44 (the “CBCA”).
The appellant argued that the application judge erred in only considering the appellant’s expectations as an employee and failing to consider his expectations as a shareholder.
The ONCA opined that the application judge took an “overly narrow” approach by placing focus mostly on the documents signed by the parties and not considering all of the circumstances. The ONCA considered some of the major principles related to the oppression remedy, including the following:
- Oppression is an equitable remedy which seeks to ensure fairness. Thus, conduct found to be oppressive does not need to be “unlawful” per se, because oppression is focused on “fairness and equity”, rather than on legal rights;
- Section 241(3) of the CBCA gives the court broad remedial powers to enforce “not just what is legal but what is fair”, including the power to make an order setting aside a transaction and compensating an aggrieved person (this requires the court to look at business realities and not just at “narrow legalities”);
- Oppression is a fact-specific inquiry and the concept of “reasonable expectations” is “objective and contextual”; and
- Directors of a corporation owe a fiduciary duty to act in the best interests of the corporation (in doing so directors may consider the interests of stakeholders in the corporation). As such, the oppression remedy focuses on harm to the legal and equitable interests of stakeholders affected by oppressive acts of the corporation or its directors.
The ONCA reiterated that determination of whether to grant the oppression remedy under the CBCA involves a two-step 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”.
The ONCA further clarified that with respect to the first part of the test (as described in the preceding paragraph) an applicant “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”. In deciding what a party’s reasonable expectations are, the court may consider the following factors:
- 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.
Given the above legal principles, the ONCA concluded that the application judge approached the issue of the applicant’s reasonable expectations “too narrowly” because he focused “primarily on the strict terms of the written agreements between the parties” rather than “considering what was fair and reasonable in the circumstances of this case”. The ONCA therefore allowed the appeal and remitted the matter back to the Superior Court of Justice to be decided at a trial, as in order to properly adjudicate the issues between the parties, the court will need to make findings of fact and findings of credibility more appropriately done with a trial, as opposed to an application.
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