Академический Документы
Профессиональный Документы
Культура Документы
1. AGENCY 5
ELEMENTS OF THE AGENCY RELATIONSHIP 5
GORTON V. DOTY [1937] 5
UNDISCLOSED PRINCIPAL 5
FRIEDMANN EQUITY DEVELOPMENTS INC. V. FINAL NOTE LTD [2000] 5
DISTINCTION BETWEEN ACTUAL, APPARENT, AND OSTENSIBLE AUTHORITY 6
FREEMAN & LOCKYER V. BUCKHURST PARK PROPERTIES (MANGAL LTD.) [1964] 6
WATTEAU V. FENWICK [1893] 7
DISTINCTION BETWEEN AGENCY AND EMPLOYMENT: QUESTION OF VICARIOUS LIABILITY OF MASTER
(EMPLOYER) FOR THE TORTS OF ITS SERVANT (EMPLOYEE) DISTINGUISHED FROM AGENCY 7
671122 ONTARIO LTD. V. SAGAZ INDUSTRIES CANADA INC. [2001] 7
2. PARTNERSHIPS 8
NATURE AND EXISTENCE OF PARTNERSHIP RELATIONSHIP 8
KHAN V. MIAH [2000] 8
HURST V. BYRK [2002] 8
INDICA OF THE PARTNERSHIP RELATIONSHIP 8
PARTNERSHIP ACT, R.S.O. 1990 (SS. 1-3) 8
POOLEY V. DRIVER [1876] 9
A.E. LAPAGE LTD V. KAMEX DEVELOPMENTS LTD. (AND MARCH) [1977] 10
LEGAL NATURE OF THE PARTNERSHIP 10
RE THORNE AND NEW BRUNSWICK WORKMANS’ COMPENSATION BOARD 10
PARTNERSHIP ACT, R.S.O 1990 SS. 1, 2, 3 (PA) 11
RELATIONSHIP AND NATURE OF THE RELATIONSHIP BETWEEN THE PARTNERS 11
MEINHARD V. SALMON [1928] 11
OLSON V. GULLO [1994] 11
RELATIONSHIP OF THE PARTNERS TO THE OUTSIDE WORLD 12
STROTHER V. 3464920 CANADA INC. [2007] (BBCA AND SCC) 12
DISSOLUTION OF THE PARTNERSHIP 13
HURST V. BYRK, [2000] 13
PARTNERSHIP ACT, SS. 6, 7, 11, 13, 24, 28-30, 33-35 14
WRAPPING UP PARTNERSHIPS & LIMITED PARTNERSHIPS AND THE QUESTION OF CONTROL BY
LIMITED PARTNERSHIPS 14
HAUGHTON GRAPHIC LTD. V. ZIVOT [1986] 14
LIMITED PARTNERSHIP ACT, R.S.O. 1990, S.13(1) 14
3. CORPORATIONS 14
1
ABILITY BY INCORPORATING JURISDICTIONS TO GRANT EXTRATERRITORIAL CAPACITY TO ITS
CORPORATIONS 15
JOHN DEERE PLOW CO., LTD. V. WHARTON [1915] 15
APPLICATION OF THE CHARTER TO CORPORATIONS AND THE STANDING OF CORPORATIONS TO
CHALLENGE LEGISLATION ON THE BASIS OF THE CHARTER 16
CANADIAN EGG MARKETING AGENCY V. RICHARDSON [1998] 16
CONSTITUTION ACT, 1867, SS.91 (POGG), 91(15) AND 92(11) 17
CBCA, R.S.C. 1985 SS.3(4)-(5) AND 15(2)-(3) 17
(C) SHAREHOLDERS 21
SOURCES OF FINANCING AVAILABLE TO A CORPORATION. BASIC DISTINCTION: DEBT AND EQUITY.
WHAT IS A SHARE: THE BASIC NATURE OF A SHARE AND BASIC RIGHTS ON A SHAREHOLDER 21
SPARLING V. QUEBEC (CAISSE DE DÉPÔOT ET PLACEMENT DU QUÉBEC) 21
ATCO LTD. V. CALGARY POWER LTD. 22
BOWATER CANADIAN LIMITED V. R.L. CRAIN AND CRAISEC LTD. 22
BASIC LIMITATION OF THE POWER OF A SHAREHOLDER 23
KELLY V. ELECTRICAL CONSTRUCTION CO [1907] 23
AUTOMATIC SELF-CLEANING FILTER SYNDICATE CO. LTD. V. CUNINGHAME [1906] 23
THE MECHANICS OF ISSUING SHARES AND WHAT ASSUMPTIONS CORPORATE LAW MAKES ABOUT THE
NATURE OF SHAREHOLDERS AND ARE THEY STILL VALID (THE CONTINUING VALIDITY OF THE
DISPERSED OWNERSHIP ASSUMPTION 24
CBCA SS.6(1)(C)-(D), 24, 25, 26, 30, 34, 49(8), 50, 118, 189 24
SHAREHOLDERS’ RIGHTS TO DIVIDENDS AND THEIR RIGHTS UPON LIQUIDATION 24
INTERNATIONAL POWER CO. V. MCMASTER UNIVERSITY [1946] 24
THE MECHANICS OF DIVIDEND DECLARATION AND DIVIDEND PAYMENT 24
R. V. MCCLURG [1990] 24
2
CBCA SS. 42, 45, 211(7)(D) 25
SHAREHOLDERS – THE CORPORATE FRANCHISE (1) WHEN CAN SHAREHOLDERS VOTE (REGULAR AND
SPECIAL MEETINGS); ON WHAT CAN SHAREHOLDERS VOTE; AND THE PROCESS OF ORGANIZING
SHAREHOLDER VOTES – PROXY SOLICITATION 25
GOODWOOD INC. V. CATHAY FOREST PRODUCTS CORP [2012] 25
GOODWOOD INC. V. CATHAY FOREST PRODUCTS CORP [2013] (COSTS) 27
CBCA SS. 109, 133-135, 137, 139-143, 146, 173, 176, 183, 190, 210-211 27
SHAREHOLDERS – THE CORPORATE FRANCHISE (2) OBLIGATIONS SHAREHOLDERS HAVE TO THE
CORPORATION AND TO OTHER SHAREHOLDERS; LIMITS ON THE RIGHT TO VOTE IN THE
ARTICLES/BYLAWS 27
JACOBSEN V. UNITED CANSO OIL & GAS LTD. (ALBERTA QB) 27
JACOBSEN V. UNITED CANSO OIL & GAS LTD. (NOVA SCOTIA SC) 28
BOWATER CANADIAN LIMITED V. R.L. CRAIN AND CRAISEC LTD. (REPEAT) 28
AND ON EXERCISE OF THE SHAREHOLDER FRANCHISE 28
TELUS CORPORATION V. MASON CAPITAL MANAGEMENT LLC (BCCA) 28
MANAGEMENT OF A CORPORATION 29
INTRODUCTION TO THE STRUCTURE OF CORPORATE MANAGEMENT 29
MERIDIAN GLOBAL FUNDS MANAGEMENT ASIA LTD V. SECURITIES COMMISSION 29
DIRECTORS AND OFFICERS; CURRENT STRUCTURE AND MAKE-UP OF THE BOARD; AND THE EFFECT OF
IMPROPER APPOINTMENT OF DIRECTORS 29
MORRIS V. KANSSEN [1946] 29
CORPORATE CRIMINAL LIABILITY 30
RHÔNE (THE) V. PETER A.B. WIDENER (THE) 30
CBCA SS.102(1), 115, 116, 118, 119, 121, AND 122(1)(B), SEE ALSO CRIMINAL CODE SS.2
(DEFINITION OF ORGANIZATION, REPRESENTATIVE, AND SENIOR OFFICER), 22.2 30
DIRECTORS’ DUTIES OF CARE 30
PEOPLES DEPARTMENT STORES INC. (TRUSTEE OF) V. WISE 30
FIDUCIARY DUTIES – INTRODUCTION – BASIC STATUTORY DUTY 31
PEOPLES DEPARTMENT STORES INC. (TRUSTEE OF) V. WISE 31
THE DUTY OF SUPERVISION 31
IN RE CAREMARK INTERNATIONAL INC. 31
CBCA, S.122(1)(A) 32
MANAGER’S FIDUCIARY DUTIES I – CONFLICT OF INTEREST AND DUTY 32
NORTH-WEST TRANSPORTATIONS CO. V. BEATTY [1887] 32
AFFIRMING OR APPROVING INTERESTED TRANSACTIONS 33
CBCA S.120 33
MANAGER’S FIDUCIARY DUTIES II – CORPORATE OPPORTUNITY DOCTRINE 33
REGAL (HASTINGS) LTD. V. GULLIVER [1942] 33
PESO SILVER MINES LTD. V. CROPPER 33
CAN. AERO V. O’MALLEY 34
BROZ V. CELLULAR INFORMATION SYSTEMS, INC. 35
MANAGERS’ FIDUCIARY DUTIES III – CHANGE OF CONTROL TRANSACTIONS. 35
INTRODUCTION TO THE RISE OF TAKEOVERS; EARLY ATTEMPTS TO CONTROL THE PROCESS:
REVIEWING THE EXERCISE OF POWERS BY DIRECTORS FOR AN IMPROPER PURPOSE 35
HOGG V. CRAMPHORN LTD. 35
TECK CORP. V. MILLAR 36
THE NEW APPROACH 37
BCE INC. V. 1976 DEBENTUREHOLDERS [2008] 37
3
MANAGERS’ FIDUCIARY DUTIES IV – CHANGE OF CONTROL TRANSACTIONS II; PROTECTING
DIRECTORS: D & O INSURANCE AND INDEMNIFICATION OF DIRECTORS 39
CYTRYNBAUM V. LOOK COMMUNICATIONS INC. [2013] 39
CBCA S.124 39
REMEDIES 50
THE REPRESENTATIVE/DERIVATIVE ACTION 50
HERCULES MANAGEMENTS LTD. V. ERNST AND YOUNG 50
APPRAISAL REMEDY; AND INVESTIGATION 51
CBCA SS. 104, 162, 167, 190, 238-240 51
OPPRESSION REMEDY I – WHO IS ENTITLED TO SUE UNDER THE OPPRESSION REMEDY? 51
FIRST EDMONTON PLACE LTD. V. 315888 ALBERTA LTD. [1988] 51
DOWNTOWN EATERY (1993) LTD. V. ONTARIO [2001] 52
DISTINCTION BETWEEN THE OPPRESSION REMEDY AND THE DERIVATIVE ACTION 53
PASNAK V. CHURA [2003] 53
CBCA SS. 238, 241-242 54
OPPRESSION REMEDY II 54
BCE INC. V. 1976 DEBENTUREHOLDERS [2008] 54
4
1. Agency
Elements of the Agency Relationship
Gorton v. Doty [1937]
Facts:
Teacher tells football coach that he can use her car to drive team to their game “as long as he was the
one driving.” Accident causes injury to one of the players, and player is now suing the teacher as the
principal of the coach, who was the agent.
Issue:
Was the coach acting as an agent of the teacher?
Reasoning:
Agency denotes the relationship where one person acts for another.
- The manifestation of consent by one person to another that the other shall act on his behalf
and subject to his control, and consent by the other so to act.
For this relationship to exist, a contract or compensation are not necessary
1. The appellant consented that the coach should act for her and in her behalf in driving the
car to and from the football game by volunteering her vehicle with the express stipulation
that he should drive it
2. The coach consented to so act for the appellant by his act driving the car
The relationship of principal and agent existed
Dissent:
There is insufficient evidence showing that the coach was (a) acting as an agent of the teacher, and
(b) acting within the scope of his authority
- Agency involves more than passive permission; requires request, instruction, or command
- This was nothing more than a kindly gesture and the statement that only the coach should
drive was not instruction, it was a mere precaution
Holding:
The relationship of principal and agent existed; the player can pursue the teacher for damages.
Undisclosed Principal
Friedmann Equity Developments Inc. v. Final Note Ltd [2000]
Facts:
FE is trying to sue the principals of FN (doctors) because FN doesn’t have enough money to pay back
the loan defaulted upon. The contract, though, was made under seal, which prevents action against
anyone but the signatories.
Issue:
Will FE be permitted to do away with the sealed K rule?
Reasoning: (SCC, Bastarache)
An undisclosed principal cannot be sued on a K executed by his or her agent when that K is executed
under seal (also does not need consideration)
- Courts should not interfere with established rules of law without clear evidence that it is
necessary to change the law to be in step with commercial reality and that a change in the
rule will not have unwarranted ramifications
In a simple K this would not be a problem, but here it was clearly under seal
Harmer v. Armstrong:
- In the case of a trust, the sealed K rule doesn’t apply because it involved a breach of trust;
was an equitable remedy as opposed to the CML sealed contract rule (doesn’t apply
here)
- Provides the means for beneficiaries to enforce those agreements entered into by their
trustees when they refuse to do so.
The sealed K rule applies to corporations equally as to individuals
5
- The application of the seal must be conscious and deliberate; must examine the
instrument/circumstances surrounding its creation to determine intention to
officially seal
No principled reason for getting rid of the sealed K rule; would create uncertainty in the law
Holding:
FE cannot sue the principals of FN because they were not parties disclosed on the K, which was
signed under seal.
6
4. The articles of the constitution do not deprive the company of capacity to delegate authority to K.
to enter into K’s on behalf of the company.
Holding:
K. had was legitimately delegated authority by B. to enter into K’s on their behalf. Therefore they are
liable. Ruled for F.
7
2. Partnerships
Nature and Existence of Partnership Relationship
Khan v. Miah [2000]
Facts:
K. and M. were partners with the goal of running a restaurant. K. were the cooks and M. were the
financiers. The location/stock/other things were acquired but the relationship broke down before
the actual restaurant started business. Was there ever a partnership?
Issue:
Do parties to a joint venture become partners only when the actual trading commences?
Reasoning:
CA said that partnership only starts once the actual venture commences
- Impossibly narrow view of the enterprise
- The acquisition, conversion, fitting out of the location were all part of the joint
venture, were undertaken with a view of ultimate profit, and formed part of the business
which the parties were in the partnership for
The rule is that persons who agree to carry on business as a joint venture do not become
partners until they actually embark on the activity in question; obtaining the things necessary
for the carrying on of that business counts as embarking on the activity (starting the trading is
secondary)
Holding:
Trial judge’s orders restored. Ruled for M.
8
3.1. Joint tenancy, tenancy in common, joint property, common property, or part ownership does not
of itself create a partnership as to anything so held or owned, whether the tenants or owners do or
do not share any profits made by the use thereof.
3.2. The sharing of gross returns does not of itself create a partnership, whether the persons sharing
such returns have or have not a joint or common right or interest in any property from which or from
the use of which the returns are derived.
3.3. The receipt by a person of a share of the profits of a business is proof, in the absence of evidence
to the contrary, that the person is a partner in the business, but the receipt of such a share or
payment, contingent on or varying with the profits of a business, does not of itself make him or her a
partner in the business, and in particular,
(a) the receipt by a person of a debt or other liquidated amount by instalments or otherwise out of
the accruing profits of a business does not of itself make him or her a partner in the business or liable
as such;
(b) a contract for the remuneration of a servant or agent or a person engaged in a business by a share
of the profits of the business does not of itself make the servant or agent a partner in the business or
liable as such;
(c) a person who,
(i) was married to a deceased partner immediately before the deceased partner died,
(ii) was living with a deceased partner in a conjugal relationship outside marriage
immediately before the deceased partner died, or
(iii) is a child of a deceased partner,
and who receives by way of annuity a portion of the profits made in the business in which
the deceased partner was a partner is not by reason only of such receipt a partner in the
business or liable as such;
(d) the advance of money by way of loan to a person engaged or about to engage in a business on a
contract with that person that the lender is to receive a rate of interest varying with the profits, or is
to receive a share of the profits arising from carrying on the business, does not of itself make the
lender a partner with the person or persons carrying on the business or liable as such, provided that
the contract is in writing and signed by or on behalf of all parties thereto;
(e) a person receiving by way of annuity or otherwise a portion of the profits of a business in
consideration of the sale by him or her of the goodwill of the business, is not by reason only of such
receipt a partner in the business or liable as such.
9
- Participating in the profits entails participation in the liabilities
* Participating in profits is a proper test for partnership where nothing exists to rebut it
Application
The intention on the face of the document was to extend to D. all the benefits of the partnership,
while protecting them from the liabilities
* The lending of a sum of money on a bona fide contract to receive a rate of interest varying
with the profits does not make the lender a partner; simple sharing of the profits in this way
does not a partner make. BUT:
- D. got ALL the benefits of the deed of partnership
- D. became entitled to shares of the capital, but ALSO entitled to compel the partners
to employ that capital in “the regular course of trade”
- There is a provision that if D. were to go bankrupt, the partnership would terminate (this
covenant is very strange for someone in the position of a lender, but not so strange for
someone acting as a partner)
Not only profit but control; not the position of an ordinary lender
Holding:
Ruled for P. The defendants, D., were acting as partners and are liable as such.
10
Was T., on the day of the accident, a workman employed by the partnership within the meaning of
the Workman’s Compensation Act, and so entitled to benefits?
Reasoning:
Under the Partnership Act, no person can enter into a contract with himself or be his own employer
- Partnerships regarded as having no legal existence distinct from the individuals
composing it, no person could be an employee of a firm to which he is a member
O. contends that partnerships should be regarded as legal entities distinct from their component
members, and therefore that the firm was capable of entering a K of employment with him
The firm name (partnership name) is a mere expression, not a legal entity
Holding:
The firm is not a legal entity, and therefore T. cannot seek compensation as an employee.
11
Reasoning:
No question that the parties were partners and G. purposefully tried to screw O.
G. must not be allowed to profit from his breach
- The proper remedy is to give 50% of the profits to O. not the entire amount
* This puts O. in the same position which he would have occupied if there had been no
wrongdoing (had G. not done the sale in secret)
- The remedy is in Equity; should not be penal in nature, which it would be if disgorgement
were ordered
* Fact that G. tried to hire a hit-man to kill O. doesn’t factor in (he was already convicted for
that)
Holding:
The proper remedy is 50% of the profits to O., not disgorgement (accounting of profits).
12
- S. should disgorge all profits received during his time with D. between January 1998 and
March 1999 (when M. and S. severed links with D.)
Is D. liable for S.’s fiduciary breach? If so to what extent?
No only was D. unaware of S.’s financial interest, but D. ordered S. to not take any interests in
Sentinel; no reason for them to believe that he didn’t comply
BUT M. contends that D. is still statutorily liable under the BC Partnership Act:
11. A partner in a firm is liable jointly with the other partners for all debts and obligations of
the firm incurred while he or she is a partner…
12. If, by any wrongful act or omission of any partner acting in the ordinary course of the
business of the firm or with authority of his or her partners, loss or injury is caused to any
person who is not a partner in the firm or any penalty is incurred, the firm is liable for that
loss, injury or penalty to the same extent as the partner so acting or omitting to act.
An injury, even without loss, is sufficient
- Doesn’t say anywhere that prior knowledge of the delinquency is a condition precedent to
liability
Requires S.’s wrong to be so connected with the partnership business that it can be said that D.
introduced the risk of the wrong that befell M.
- CA said no
- SCC says Yes
Holding:
D. is vicariously liable for the profits that S. billed to M. directly, but nothing else. S. is liable for all the
profits he made in breach of the fiduciary duty owed to M.
13
Partnership Act, ss. 6, 7, 11, 13, 24, 28-30, 33-35
3. Corporations
14
Understood that incorporation of companies with fed objects is prohibited for the provs and vice
versa for fed
But nothing to suggest that a provincially incorporated company can’s seek the “Comity” of
another state/prov to enable it to operate within its borders
- Permission, registration, license giving right to operate
- A province can’t give a corporation powers outside of the province because it would be
ultra vires the legislatures power
A fed incorporated company is a domestic company in all parts of Canada; exercises its powers as of
right in all Canadian provinces
Holding:
Both Prov and Fed can incorporate.
15
- Fed can confer power to trade everywhere in Canada, but not to infringe on prov rights
under s.92
The prov provisions compelling J. to get a prov license/register in the prov as a condition of
exercising its powers or suing in the courts are inoperative
Prov cannot interfere with the status/corporate capacity of a Dominion company in so far as
powers conferred by the Parliament of Canada
Holding:
Provincial legislature cannot restrict fed company powers directly conferred upon it by the fed
government; it can, however, tax all companies equally through the vehicle of a license, just not in a
way that targets fed companies.
* Sidebar: For Big M exception to apply (give corporation recourse to Charter “as of right”):
1. Must be corporation
2. Must be defendant brought before court involuntarily
3. Plaintiff must be the state or a state agency
16
Constitution Act, 1867, ss.91 (POGG), 91(15) and 92(11)
17
o The action must be that of the corporation
General Principles
A company has no existence before its incorporation
See Kelner v. Baxter
A K made by promoters of a company before incorporation binds only the promoters;
after, a company by its unilateral act may take the benefit and assume the liabilities of
a K made in its name or on its behalf before incorporation
CBCA s.14 supports this
For action/conduct to show intention of corporation to adopt pre-incorporation K:
1. Must be performed by the corporation
2. Must be performed with the knowledge of the terms of the K
In entering into pre-incorporation K, S. took the risk that O. may not be incorporated
Holding:
[Appeal allowed by majority]
Effect of incorporation
Salomon v. Salomon Co.
Facts:
A father decided to include his family members in his business by incorporating the buisness and
dividing the shares between them. However, he held almost all the shares for himself, giving one
share to each of the other 6 shareholders to give them a basic interest. Business went out the
window, creditors (S. Co.) going after S. personally saying the company wasn’t actually a company
Issue:
Was this a validly constituted corporation?
Reasoning: (Lord Halsbury)
18
Argued here that it can’t be a company simply having 6 minimal shareholders enabling the 7th to
carry on a corporation for the purpose of protecting himself from liability
Nothing in statute dictating the proportion of interest that each shareholder must have
One share is enough to make someone a shareholder
Absent fraud/misconduct, there’s nothing to limit him from doing this
Impossible to deny the validity of the transactions into which it has entered if it was validly
incorporated
Concurring: Lord MacNaghten
A company cannot lose its individuality by issuing the bulk of its capital to one person over the others
Limiting personal liability is one of the main attractions of incorporation along with
borrowing money; the Co and the shareholders are separate legal entities
“The unsecured creditors of S. Co. may be entitled to sympathy, but they have only themselves to
blame for their misfortunes”
Holding:
S. had a legitimate company.
Basic Corporate Structure: distinction between articles and bylaws; the death of the
ultra vires doctrine
Attorney General of Belize v. Belize Telecom Ltd.
Facts:
Gov wanted to sell its financial interests in Belize Telecommunications Authority to the new
company, B. Articles of incorporation include a ‘Golden Share’ which can only be transferred to a
minister of the gov of Belize which confers no economic authority; just an instrument of control.
Article exists which gives special shareholder power to require company to redeem/extinguish the
special share. Articles protect the special shareholder on three levels: 1. Special rights to
appoint/remove directors 2. Restrictions on what majority of board can do without the special
shareholder’s consent 3. Restrictions on what shareholders in general meetings can do without
special shareholder’s consent (this case challenges #1). Holder of special share can only appoint
directors if it also holds 37.5% of C ordinary shares.
Issue:
What is the meaning of the articles?
Reasoning:
Only person who has power to remove directors is special shareholder with 37.5% of common
shares
Because of default and seizure of assets, there was no such person in existence
Nothing in articles dealing with situation of special share holder without enough common
shares
B. says that result is that directors are irremovable
A. says this is ridiculous
Court has no power to improve the document, just to determine what it means
Intention of the parties
For a term to be implied in a K:
1. Must be reasonable/equitable
2. Must be necessary to give business efficacy to the K
3. Must be so obvious that it goes without saying
4. Must be capable of clear expression
5. Must not contradict any express terms
Application
Board constructed to reflect interests of the parties
Political/Economic interest of gov, economic interest of ordinary shareholders
Problem is that articles don’t deal with a change in shareholding that results in board no
longer reflecting appropriate shareholder interests, without enabling this to be corrected
19
Terms must be read to mean that when the special share goes, the government appointed
directors go with it; so when the special share is redeemed, the gov official is out
Also, upon redemption of the special share, the special C directors cease to hold office
Holding:
The company was part of a privatization scheme, and the intent of the parties would not seek to keep
the gov officials as perpetual directors.
CBCA ss.9, 14, 15-18, 102-3(1) et (2), 104-106, 109, 115-116, 121, and 256(2)
Anti-Thesis
Shlensky v. Wrigley
Facts:
Shareholder is bringing action against director of Wrigley for not hosting night-games at Wrigley
baseball stadium. S. claims that night games would produce more profits, and that the only reason W.
doesn’t host them is because of a personal dislike for them. S. alleges this amounts to direction
against the corporate purpose à la Dodge v. Ford.
Issue:
Was W. acting negligently/mismanaging as a director by not having night games?
Reasoning:
S. alleges that the reason the Chicago Cubs aren’t making as much profit is because they aren’t having
night-games.
W. has admitted that he has not refused night games because of any interests in the economic
wellbeing of the company, but because of his concern for the neighborhood
20
Fraud, illegality, conflict of interest not the only bases for stockholder’s action against
director
S. argues that this establishes arbitrary/capricious use of director’s discretion, which
under Dodge v. Ford is another actionable instance
Application
Clear that in Ford, court felt there must be fraud, etc. to ground an action against a director; made
clear when they refused to interfere with expansion
Taking potential patrons of the stadium (neighbourhood) into consideration is a
logical business move
Question is not whether it was right or wrong
Also no grounds to show that any damage has occurred to the company based on W.’s actions
Holding:
Burden of proof of S. hasn’t been met; there were business justifications for W.’s decision, and not
clear evidence of any detriment to the company resulting from them.
Canadian Solution
BCE Inc. v. 1976 Debentureholders [2008]
(See p37)
(C) Shareholders
Sources of financing available to a corporation. Basic distinction: debt and equity.
What is a share: the basic nature of a share and basic rights on a shareholder
Sparling v. Quebec (Caisse de dépôt et placement du Québec)
Facts:
Q. is an agent of the Crown, therefore according to s.16 of the Interpretation Act, can put itself outside
the purview of the CBCA because of immunity provisions. Q. became an ‘insider’ of Domtar according
to CBCA s.122 (2),(4) by owning more than 10% (22.7%) of its common shares. According to that
article, Q. was supposed to submit an insider report, which it refused to do under immunity. Director
of Domtar, S., filed for motion for declaration that CBCA applies to Q.
Issue:
Does the CBCA apply to Q., a Crown agent?
Reasoning: (SCC La Forest J)
Normally, a Crown agent is exempt from the application of state legislation
However, exception under the ‘Benefit/Burden Exception’ to Crown immunity (“waiver
exception”)
Q.: By purchasing shares, Q. did nothing but exercise a right conferred by the charter
* The issue is not whether the benefit and burden arise under the same statute, but whether there
exists a sufficient nexus between the benefit and burden.
A share is not an isolated piece of property; it is a bundle of interrelated rights and
liabilities
Statute, common sense, and common law indicate that this bundle can’t be
apportioned piecemeal at the whims of the Crown (taking only benefits not liabilities)
21
* The very act of purchasing is an implicit acceptance of the benefits AND liabilities
Holding:
There was a close nexus between the benefit/burden to trigger the exception to Crown immunity. By
buying the shares, the Crown implicitly agreed to be governed by the CBCA.
22
Basic Limitation of the power of a shareholder
Kelly v. Electrical Construction Co [1907]
Facts:
Action to set aside the election of the board of directors of E. K. was not allowed to use proxy votes
conferred upon them in the voting, and contend that they would have been elected had they not been
barred from using the proxies.
Issue:
Did this constitute an usurpation of office?
Reasoning:
The election of directors is a matter under control of a majority of shareholders
In respect of acts within the powers of the company, and thus capable of confirmation by the
majority of the shareholders, the Court will not interfere at the instance of individual shareholders
Plaintiffs have to obtain the consent of the company to sue in the company’s name
By-law respecting proxies passed by BoD 1897:
According to Companies Act s.47, directors have power to pass by-laws regulating proxy
votes, but for this By-Law to be valid, it had to be confirmed at the next general meeting
This by-law was not confirmed, thus it ceased to have force
Annual Shareholders meeting 1905:
Purported to pass a by-law of the exact same language
Companies Act giving power to directors to pass by-laws concerning proxy votes
impliedly withholds it from general shareholders
Therefore, when the election of the directors happened, there was no by-law regulating proxies in
existence (BoD failed to do it, the shareholders can’t do it)
Those proxy votes produced at the meeting were sufficient authorization, and should have
entitled those votes to count
However, no reasonable certainty who they would have voted for
* The election should be set aside and a new vote had
Holding:
There should be a new vote for directors.
23
Once there is a stipulation for a ‘special resolution’ vote requirement, what right is there to
interfere with the K apart from in situations of misconduct on part of directors?
Not a simple Principal-Agent relationship; directors are in position of managing
partners appointed to fill the post by a mutual agreement between the shareholders
Holding:
The shareholders can only bind the directors according to the articles of incorporation; in this case
by a special resolution.
The mechanics of issuing shares and what assumptions corporate law makes about
the nature of shareholders and are they still valid (the continuing validity of the
dispersed ownership assumption
CBCA ss.6(1)(c)-(d), 24, 25, 26, 30, 34, 49(8), 50, 118, 189
24
saying that dividends in past years should have been properly attributed to all the common shares
notwithstanding the discretionary provision; rights attach to the shares, not the people holding them.
Issue:
Is the discretionary dividend clause valid?
Reasoning: (Dickson CJ)
Decision to declare a dividend lies within the discretion of the directors, subject to any restrictions
included in the articles of incorporation
The rights carried by all shares to receive a dividend declared by a company are equal
unless otherwise provided in the articles of incorporation
The presence of a discretionary dividend clause can only be interpreted as creating differences
between share classes; rebuts the equality presumption
The fact that directors may consider the identity of shareholders doesn’t necessarily render
the declaration invalid on the basis of a conflict of duty/self-interest
The limitation on the duty is based on a Fiduciary Duty owed by directors to the
corporation (Canadian Aero Service Ltd. v. O’Malley); no breach here
Represents a legitimate exercise of the K rights between parties
Dissenting: (La Forest)
Directors do not have the power to discriminate between different classes of shares when
determining how a dividend should be distributed
All shares of a type must be treated equally
Even when more than one class of shares is created, the directors are not free to
discriminate arbitrarily between the classes when awarding a dividend (just how
much each will get)
Cites Jacobsen and Bowater as authority that even shareholders themselves may not agree
to circumvent the principle that rights attach to shares not the individuals
This discretionary dividend clause contravenes principle that directors can’t favour one class
at the expense of another
Shareholders cannot agree to give directors discretion to interfere with their right to
dividends/return of capital by choosing to give another series priority
Holding:
The potential of each type of share to receive dividends in different amounts is sufficient to
differentiate the A/B/C shares. It is valid exercise of incorporation powers.
Shareholders – The Corporate franchise (1) When can shareholders vote (regular and
special meetings); on what can shareholders vote; and the process of organizing
shareholder votes – proxy solicitation
Goodwood Inc. v. Cathay Forest Products Corp [2012]
Facts:
G. is shareholder of C. applying for multiple orders against C. (i) order directing holding of
shareholder meeting; (ii) orders requiring C. to comply with provisions of CBCA; (iii) order
restraining C. from transacting certain types of business without court approval prior to constitution
of new BoD.
Current BoD lacks Quorum of directors (4/7; only has 3) according to Company By-Law 1.
By law s.10: no business can be transacted until quorum is met, majority are resident
Canadians
o CBCA 105(3): directors can’t transact business unless 25% of BoD are resident
Canadians
Ontario Securities Act ss.77, 78: C. has failed to file financial statements for period after Sept.
30, 2010 = violation
CBCA 133(1): BoD of C. required to hold annual general meeting no later than June 30, 2011;
failure = violation
25
Issues:
Does the shareholder have the rights to force the BoD’s position in this way?
Reasoning:
G. hired shareholder advisory firm VC&Co. to represent them
Submitted outline of plan to reconstitute company’s BoD
Wrote to C. about CBCA s.111(2)
o Failing quorum of BoD/failure of remaining BoD to call meeting, special meeting can
be called by any shareholder
o C. BoD refused; called it a bad-faith move
Also requested pursuant to CBCA s.21 to see records of company and shareholders list
o BoD hasn’t complied
Mr. Chan (C. BoD) blames all problems on BoD members who left
Mr Miller (C. BoD) also divulged that business was still being carried out by them
Also, ~900K$ frozen in C.’s Canadian account (no signatories; CFO terminated)
Analysis:
(i.a) Calling a shareholder meeting
CBCA s.144 authorizes the court to call a shareholder meeting where other means of calling it
are “impracticable”
Courts have interpreted ‘impracticable’ narrowly, ordering shareholder meetings only in
exceptional circumstances
G. is entitled to call a shareholder meeting
1. Current directors have failed to do so, contravening CBCA s.111(2)
2. Shareholders have lodged requisition with the BoD under CBCA 143(1); it’s clear the BoD
has no intention of responding by calling a meeting
Under CBCA 111(2) and 143(4) shareholders can call meeting where board refuses or
neglects to act
It is appropriate for the court to call the meeting in these ‘extraordinary’ circumstances
C. lacks a BoD with authority to manage business affairs of C.
Mr. Chan (C. BoD) called the request for meeting “bad-faith”; shows fundamental
misunderstanding of their duties; his comments raise concerns of past mismanagement
(i.b) Directions for conduct of the meeting
Meeting must be held in accordance with timetable accommodating C.’s shareholders time decide
who to vote for
Proxies will go through Equity Financial Trust Company
Distributing notice of meeting will be task of applicants (BoD not trustworthy)
C. is entitled to have access to funds to retain counsel to provide advice in respect of ordered
shareholder meeting (can apply to have funds unfrozen)
(ii) Compliance Orders
CBCA s.247 allows shareholders to apply to the court for orders in situations where BoD “does not
comply with this act”; the court can make “any further order it sees fit”
1. List of shareholders; 2. List of beneficial owners; 3. Name/contact of company’s share
transfer agent
Applicant is entitled to all three
(iii) Restrictions on powers of current BoD
G. seeks to prevent C. BoD from transacting any business other than that necessary to convene the
meeting; specifically preventing them from spending money, entering K’s, hiring/terminating
employees, etc.
Court must tailor remedy under CBCA s.247 to the specific issue
Must be proportionate
G.’s orders should be granted pursuant to CBCA s.247
Serious doubt that C. BoD will comply with ‘ordinary course of business’ stipulation
Temporary receiver and manager should be named to deal in the meantime
Holding:
Yes to all three of G.’s requests.
26
Goodwood Inc. v. Cathay Forest Products Corp [2013] (Costs)
Facts:
Pursuant to earlier ruling against C., G. submitted request for costs:
1. Printing notice of meeting/dissident’s proxy circular
2. Fees of Court-appointed independent chair of shareholders’ meeting
3. Fees/disbursements of VC&Co (shareholder advisory consultant)
4. Legal fees (McCarthy’s)
Issue:
What fees is G. entitled to?
Reasoning:
At the meeting, C.’s shareholders voted overwhelmingly to elect the four new directors supported by
G.
CBCA s.143(6) deals with reimbursement of costs of the requisitioning shareholders:
Any costs “reasonably incurred by them in requisitioning, calling and holding the
meeting”
For meeting called by court, no specific provisions, however court reserves broad
jurisdiction to determine/award costs under the CBCA
G. should recover costs similar to those he would be entitled to if he had called the meeting
himself (according to s.143(6))
1./2. Both recoverable as they represent costs incurred for ‘holding the meeting’ and ‘calling the
meeting’
3. Fixed fee of 400K$ with VC&Co
Different types of work performed
I. Actual requisitioning
II. Providing evidence
III. Discussions with the court-appointed temporary receiver and manager
IV. Providing strategic advice to G. and shareholders
V. Providing strategic advice to G.’s proposed slate of directors
CBCA s.143(6) covers only those costs under first heading; the rest don’t fall under
“requisitioning, calling, holding the meeting”
4. G. is entitled to legal fees incurred with McCarthy’s on a straight time basis plus H.S.T. and
disbursements
Fees incurred for calling/holding the meeting, including the application to court to secure
the meeting (falls under CBCA 143(6))
G. is not entitled, however, to ‘bonus’ paid to McCarthy’s subject to success
Holding:
C. must reimburse G. on the terms discussed above.
CBCA ss. 109, 133-135, 137, 139-143, 146, 173, 176, 183, 190, 210-211
27
Company first incorporated under Companies Act, got supplementary letters patent for new by-law
under Canada Corporations Act, then validly brought forward through articles of continuance for
CBCA
Argued that law establishes a presumption of equality 1 vote for 1 share that can’t be upset
If this is to vary, then different share classes must be established
Analysis:
The provisions of the CBCA must be read as a whole, and not in isolation
CBCA 134(1): unless the articles provide otherwise, each share of a company gives the
holder 1 vote.
This must be read in relation to CBCA 24(3), which specifies that it is only when there
is more than one class of shares that different rights, etc. attaching to shares may arise
Holding:
By-law 6 contravenes the CBCA and is invalid.
Jacobsen v. United Canso Oil & Gas Ltd. (Nova Scotia SC)
Facts:
Trial judge wasn’t aware that U. was switched from Federal to Provincially incorporate company in
Nova Scotia. As such, U. would be under the Nova Scotia Companies Act, not the CBCA.
Issues:
Is by-law 6 still invalid?
Reasoning:
Independent scrutineers/independent chairman:
A shareholder cannot complain if the company and its directors act within the confines of those
internal regulations in the absence of fraud, illegality or oppressive conduct
None of those elements are present here
Restraining the use of by-law 6:
Trial judge didn’t deal with question of voting restriction under NSCA, only CBCA
Not satisfied that it would be illegal under NSCA; it was approved by shareholders on a 1 for 1 share-
vote basis
For chairman to apply the by-law is not oppressive or unfairly prejudicial to the plaintiff
Trial decision only decided that by-law was invalid under CBCA, not NSCA; a trial regarding
the by-law’s validity under the NSCA must occur to determine that matter, not at this
summary hearing 4 days before the AGM
Holding:
The voting restriction should be applied in conformity with the articles of the corporation.
28
Can CDS bring this action on behalf of M.? Does M. have the right to bring an action with only a
minimal economic interest in the Co.?
Reasoning:
TELUS argues only a shareholder can requisition a meeting; CDS isn’t a shareholder, therefore has no
standing in the matter
If M. isn’t a party to the matter, they shouldn’t have named them in the action
Further, CDS has the right to requisition the meeting on behalf of M.
1. It must ensure that it is acting under instructions
2. Those instructions must come from persons who hold requisite number of shares to
requisition a meeting
There is nothing in the BCBCA s.167 that suggests that a requisitioning shareholder must be the
beneficial owner of shares or that he must disclose the name of the beneficial owner
The Act should be read in its entire context in its ordinary sense
Resolutions brought by CDS
Trial judge also found resolutions put forward by CDS would amend Art. 27 of T.’s bylaws without
complying with the requirements set out in that provision
The resolution would not “delete, amend, modify, or vary” existing provisions of Art.27
(which would require a 2/3 special vote) since no right to exchange exists
The articles don’t suggest any ability to exchange non-voting shares for voting ones;
therefore no right is being altered by CDS’s proposed amendments
* Therefore, CDS’s resolutions valid
Empty Voting:
T. argues that M. shouldn’t be able to do this because while they hold huge amount of votes, very little
economic interest
Despite its hedged position, M. does hold some economic interest in T.
The lack of economic connection is no reason to deny the voting rights that it came by legally
Holding:
Ruled for M.; CDS can bring the action; M.’s voting rights stand despite hedged interests.
Management of a Corporation
Introduction to the Structure of Corporate Management
Meridian Global Funds Management Asia Ltd v. Securities Commission
Directors and Officers; current structure and make-up of the board; and the effect of
improper appointment of directors
Morris v. Kanssen [1946]
Facts:
A company was incorporated with the purpose of purchasing a movie theatre. K. and C. were sole
shareholders. They acquired the theatre. C. schemed with S. to get rid of K. C. and S. falsely claimed
that a meeting of directors was held where S. was fraudulently appointed director, and who then
requested K. resign from office of director. Later, no general meeting held in 1941, so both C. and S.
ceased to be directors according to company’s articles. In 1942, S. transferred shares to M. K. then
issued this action, for shares to be declared in only himself and C. as before.
Issue:
What happens to M.’s interests?
Reasoning: (Lord Simonds)
C., S., and K. all ceased to be directors in 1941
M. relies on s.143 of the Companies Act and Article 88:
29
“The acts of a director or manager shall be valid notwithstanding any defect that may afterwards be
discovered in his appointment or qualification”
Can only be invoked where there is defect afterwards discovered in appointment or
qualification of a director
Vital distinction between (a) appointment where there is a defect, (b) no appointment at all
(a) Some act is done which purports to be an appointment, but is inadequate because of
some defect
(b) No defect because there is no act at all
Application:
The section does not cover a case in which there has been no genuine attempt to appoint at all
Section cannot be utilized for the purpose of ignoring the substantive provisions relating to
appointment
It is supposed to cure defects in appointment; here there has been a total lack of valid
appointment = in reality a fraudulent usurpation of authority
An ostensible agent cannot bind his principal to that which the principal cannot lawfully do
Here M. was acting as director; he cannot presume in his own favour that things are rightly
done if inquiry that he ought to have made would tell him that they were wrongly done
Holding:
Appeal dismissed.
CBCA ss.102(1), 115, 116, 118, 119, 121, and 122(1)(b), see also Criminal Code ss.2 (definition
of organization, representative, and senior officer), 22.2
30
Fiduciary Duty:
The fiduciary duty is owed to the corporation and not to the creditors CBCA s.122(1)(a).
No fraud or dishonesty present. The decision to allocate the inventory in the particular
manner was not a situation where the directors profited or put themselves in conflict of
interest. Therefore, any liability would have to arise by virtue of the director’s breach of the
generalized duty of loyalty to the company; that is, the directors did not act in the company’s
best interests.
The directors can take the creditors’ interests into account, but they do not have to
(permissive approach to the “entity model”).
The court found, to the contrary, that the directors did act in Peoples’ best interests by trying
to create a more efficient (less costly) procedure for acquiring, storing, and sharing
merchandise between the two companies.
The creditors can sue personally under the ‘Oppression Remedy’ or ‘Duty of Care’ if the
directors acted in a way that affected their interests or expectations.
Therefore, there is no need to extend the duty of loyalty to require that the directors account
specifically for the creditors’ interests when managing the corporation.
The duty of the directors is to make the company a better company not necessarily
preferencing one group of stakeholders over another.
Duty of Care:
Directors won’t be held to be in breach of the duty of care under s.122(1)(b) of the CBCA if
they act prudently and on a reasonably informed basis
Reasonable in light of all circumstances, including prevailing socio-economic conditions,
about which they knew or ought to have known
No breach here; implementation of new policy was business decision trying to correct
serious problem
Rationale:
The duty of loyalty does not extend to creditors. So long as the directors act in the best interests of
the corporation, even if creditors take a loss, the directors are not personally liable for their
decisions.
Holding:
No.
31
A breach of duty to exercise appropriate attention, as the court notes, is more difficult for Plaintiffs to
prove than a breach of the duty of loyalty.
Most decisions that would come under this duty will resemble many decisions
shielded by the business judgment rule.
There was no evidence that the directors knew that there were ARPL violations, and there
was no systemic or sustained failure to exercise oversight.
Rule to take away:
Directors are potentially liable for a breach of duty to exercise appropriate attention
if they knew or should have known that employees were violating the law, declined to
make a good faith effort to prevent the violation, and the lack of action was the proximate
cause of damages.
Holding:
The terms of the settlement merely required Caremark to institute policies to further assist in
monitoring for violations, which they did. Therefore the settlement was approved.
CBCA, s.122(1)(a)
122. (1) Every director and officer of a corporation in exercising their powers and discharging their
duties shall
(a) act honestly and in good faith with a view to the best interests of the corporation;
32
Affirming or Approving Interested transactions
CBCA s.120
120. (1) A director or an officer of a corporation shall disclose to the corporation, in writing or by
requesting to have it entered in the minutes of meetings of directors or of meetings of committees of
directors, the nature and extent of any interest that he or she has in a material contract or material
transaction, whether made or proposed, with the corporation, if the director or officer
(a ) is a party to the contract or transaction;
(b ) is a director or an officer, or an individual acting in a similar capacity, of a party to the contract or
transaction; or
(c ) has a material interest in a party to the contract or transaction.
33
The Court applied the rule in Regal (Hastings). To succeed, the plaintiff must show that the director
took a corporate opportunity “by reason of and in the course of” his employ as director. The
plaintiff need not prove bad faith.
The Court distinguished Regal on the basis that Cropper did not rely on privileged or
confidential information. Dickson approached Cropper in his personal capacity, not in
his capacity as a director.
Furthermore, enough time had passed between the rejection of the offer by the corporation
and Cropper’s acceptance (“forgot all about it”) – which evidenced the fact that that the
opportunity was no longer a “corporate opportunity”.1
Rationale:
The duty to avoid taking opportunities does not last indefinitely. After the proposition is
rejected by the company, a director can act on opportunity.
Holding:
No.
* SideBar: The conflict between Peso and Regal seems to be: the more involved you are as a
director, the less likely it is that you can take advantage of business opportunities in your
personal capacity. This seems antithetical to the rule in Regal.
What happens if the directors or officers resign? Does the duty of loyalty end? The Court in
Canadian Aero held that the duty of loyalty persists.
1What would have happened if Cropper had been offered the opportunity before the corporation?
Cropper is not under a duty to give the opportunity to the corporation. In such a case, there would
have been no problem. In this case, however, Cropper found out about the offer by virtue of his office.
Dickson went to the company first – and as such the company had the opportunity to act.
34
Broz v. Cellular Information Systems, Inc.
Facts:
Broz was President and sole stockholder of RFB Cellular. He was also a board member of Cellular
Information Systems (CIS), a competitor of RFB.
RFB owned a license (“Michigan-4”) which allowed it to provide cell service to a portion of
rural Michigan. Mackinac Cellular Corp. owned its own license (“Michigan-2”) which was
immediately adjacent to Michigan-4.
Mackinac wanted to sell Michigan-2, and Broz, after meeting with numerous CIS directors,
went ahead and purchased Michigan-2 for RFB.
Issue:
By purchasing the license for RFB, did Broz breach his fiduciary duties to CIS? More specifically, did
he usurp a corporate opportunity?
Reasoning: (Delaware)
A corporate opportunity exists where:
(1) The corporation is financially able to undertake it;
(2) It is in the line of the corporation’s business;
(3) It is of practical advantage to it;
(4) It is one in which the corporation has an interest or a reasonable expectancy; and
(5) By embracing the opportunity, the self-interest of the officer or director will be
brought into conflict with that of the corporation.
Application:
(1) CIS was not financially capable of exploiting the Michigan-2 opportunity – it had
just emerged from a length and contentious insolvency reorganization.
(2) CIS had no interest or expectancy in the Michigan-2 opportunity – it was actually in
the process of divesting its cellular licenses.
(3) There was no conflict – Broz communicated with a number of the directors prior to
moving forward.
Holding:
No.
Introduction to the rise of takeovers; Early attempts to control the process: Reviewing
the exercise of powers by directors for an improper purpose
Hogg v. Cramphorn Ltd.
Facts:
H. made bid to buy all shares of the defendant company. Directors of C., for various reasons, didn’t
believe that it would be in best interests of either the company or its employees to make the sale,
moved to block the purchase. Made allotment of 5,707 preference shares with special 10 votes each
which were assigned to trust for benefit of the employees. The BoD made loan to trustees to enable it
to purchase the shares out of the Employee’s Pension Fund. Then advanced further 28,293$ to enable
trustees to purchase more preference shares. Thus, the BoD had enough votes to block H.’s takeover.
H. became co-owner of 50 ordinary shares, brought action.
Issues:
1. Was the BoD actions attaching 10 votes to each of the 5707 preference shares ultra vires?; 2. Was
allotment of those shares to trustees ultra vires?; 3. Was the company’s execution of the trust deed
ultra vires?
Reasoning:
Voting
According to a collective reading of the company’s articles s.13/75, no more than one
vote can be attached to each share; could not have attached the special 10-vote privilege
to the 5707 shares = ultra vires BoD’s powers
However, the allotment of new shares itself is perfectly fine
35
Allotment of shares to trustees/execution of trust
Allotment was made with primary objective of preventing H. from taking over
Directors were using the utmost good faith/acting in what they considered best interests of
the company
However, Directors acted with primary purpose of ensuring their control of the company, and
manipulated the voting positions
BoD is in fiduciary position when exercising its powers and cannot act in such a way as to
interfere with exercise by the majority of its constitutional rights
Good Faith of BoD doesn’t factor in; a majority of shareholders in a GM is entitled to
pursue whatever course it wants whether stupid or not
Power to issue shares was a Fiduciary Power which the BoD exercised for an improper motive
Had the majority of shareholders approved the issue of shares, it would be ok
Therefore, this question should be put to the GM, minus the 5707 shares issued, to decided
whether the shareholders want to go along with BoD
The issue of the Trust and their subsequent purchases of shares are integrally connected to issue of
shares; if shares fail, so to does the trust
Holding:
10 vote provision is ultra vires; the question of share issuing to trustee will be remitted to GM of
company
* All the actions of the BoD ratified by shareholders at GM.
Teck had shown an interest in doing the ultimate deal with Afton; however, Millar and the other
directors felt that Teck was not a suitable partner. Teck said screw you and acquired the majority of
the shares in Afton so that it could replace Millar and the other directors (by a special meeting of the
shareholders) and conclude the ultimate deal. Before the Board was dismissed, Millar concluded the
ultimate deal with Canex, thus diluting Teck’s majority interest in Afton.
Issues:
Were the directors’ defensive tactics disloyal?
Reasoning:
The directors are not agents of the shareholders.
Shareholders do not have powers of management; they have powers to vote at shareholders
meetings, to remove directors, to pass amendments to corporate by-laws, etc.
The court overrules Hogg v. Cramphorn to state that the directors can consider the
interests of the company as a whole, and not just the interests of the majority
shareholders.
Shareholders are not the owners of the corporation
They are passive investors and the directors have to account for the interests of the other
stakeholders as well.
The directors cannot ignore the interests of shareholders, however.
The directors would be acting in good faith even if they considered the interests of the
employees.
The Court applies a modified objective test to assess the fidelity of Millar’s actions.
The directors must perceive a substantial risk of harm to the corporation to justify
their actions
Must be acting in good faith
36
Must have reasonable grounds to believe that the takeover is not in the best interests
of the company
In this case, Millar was wary of Teck; he had misgivings about its financial capacity, its technical
expertise, managerial strength, and marketing experience.
Rationale:
The directors can use defensive tactics if they reasonably believe that the acquiring company would
substantially harm the corporation.
Holding:
No.
37
Directors may find themselves in situations where it is impossible to please all stakeholders
They must decide what is in the best interests of the corporation in the particular
situation it faces
Application
D. asserts that they had:
(A) A reasonable expectation that B. would protect their economic interests as security holders in
Bell Canada by maintaining the investment grade trading value of their debentures
B. took 3 different bids, all involved serious debt.
No reasonable expectation established here
(B) A reasonable expectation that the directors would consider their economic interests in
maintaining the trading value of the debentures
Reasonable expectation established
But directors fulfilled their duty to consider D.’s interests; made commitments to
honour K; just decided that while K terms would be honoured, no other commitments
could be made
Criteria at (i) weigh against finding an expectation beyond the K interests
* No breach of reasonable expectation established
38
Managers’ Fiduciary Duties IV – Change of Control Transactions II; Protecting
Directors: D & O Insurance and Indemnification of directors
Cytrynbaum v. Look Communications Inc. [2013] ONCA
Facts:
C. were directors of L. who adopted a share plan (SARP) as incentive for officers/employees.
Contrary to the terms of the SARP, the BoD authorized payment of plan at almost twice the market
value per share (it was supposed to be at market value). Payments not disclosed to shareholders
until almost a year later. Foreseeing lawsuit, directors then authorized Co to pay 1.5M$ in legal
retainers for their legal fees, then resigned as directors. L. (on behalf of shareholders) commences
action seeking repayment of bonuses for breach of fiduciary duty, etc. Subject of this appeal is L.’s
refusal to pay advance funding 1.5M$ in legal fees. C. seeking declaration that L. has to pay.
Issue:
Is L. required to pay the advance legal fees of former directors?
Reasoning: (Sharpe ONCA)
The Law
In Canada, advance funding for legal costs for a Co’s directors requires court approval
according to CBCA s.124(4)
Also, CBCA s.124(3)(a) requires that the directors acted “honestly and in good faith with a
view to the best interests of the corporation”
Directors benefit from a presumption of good faith which the party bringing the action can
rebut by establishing a strong prima facie case of bad faith
CBCA s.124(4) applies both to actions brought by the corporation and to derivative actions
Application
1. Advancement of legal fees requires court approval, which should be withheld if director has
not acted in good faith (CBCA s.124(3)-(4))
2. The strong prima facie test for rebuttal of the presumption of good faith of the directors strikes an
appropriate balance between encouraging responsible behavior and protecting the Co vs. Protecting
the directors
3. The trial judge did not err in finding a strong prima facie case of bad faith against the
directors
The share valuation for the SARP plan was twice the actual market value, resulted in undue
profits for directors
C. authorized payment of legal fees without proper legal advice and on their way out the
door
Business Judgment Rule doesn’t protect them here; was not within a range of reasonable
alternatives, and was not taken with any legal advice
The retainer payments were part of a pattern of self-interested behavior that supports finding a
strong prima facie case of bad faith
Holding:
Appeals dismissed; C. is screwed.
CBCA s.124
Reasons for setting the basic corporate risk allocation: veil-piercing and
reverse veil-piercing
Lee v. Lee’s Air Farming Ltd.
Facts:
Lee was the director, sole shareholder, and employee of Lee’s Air Farming. He took out employment
insurance (as required by law) for the company. Lee died in a plane crash while doing business for
39
the company. The insurance company refused to pay the indemnity to Lee’s wife, explaining that Lee
was a director and not an employee.
Issues:
Can Lee be both a director and employee of a corporation?
Reasoning:
Again, what does it matter if Lee died, or someone else did.
A person can have multiple offices; the corporation contracted with Lee to hire him as
an employee (they are separate: Peoples)
It is up to the creditor, the insurance company, to determine the risk of Lee’s death.
In this case, Lee was a contractual employee of the corporation. He earned a living by piloting for the
business.
Once you have the Co it’s a separate legal personality
Lee as director enters into K with Lee the worker
From legal analysis, it’s correct; company is separate legal personality telling Lee the
person what to do
Rationale:
A person can hold multiple roles in a corporation.
Holding:
Yes. A person can have multiple offices/roles.
40
VTB Capital PLC v. Nutritek International Co.
Facts:
V. entered deal through a Russian company RAP to buy six Russian dairy companies, for 225M$. RAP
was to get the loan from V. then buy the companies from Nutritek. Nutritek was owned by Marshall
Capital Holdings, which was owned/controlled by Konstantin Malofeev (M.). The companies ended
up being worth about 40M$, so V. was in essence an unsecured creditor when RAP went bankrupt. V.
trying to pierce the corporate veil to hold M. and MCH liable.
Issue:
Can V. hold M. and MCH liable for RAP’s defaulted debt?
Reasoning: (Lord Neuberger)
V. relied heavily upon false representations as to value of dairy companies when they approved the
loan to RAP.
V. ignored warnings from risk department
Failed to properly vet the borrower
Application
V. wants MCH and M. to be held jointly/severally liable with RAP for breaches of loan
agreements as if they were co-contractants
Alleged that M. used RAP’s separate legal status to disguise the ownership ultimately
exercised over RAP by M. and MCH
Is piercing the corporate veil a real thing?
Precise nature, basis, meaning of the principle is obscure
Often accompanied by prejorative expressions (sham, mask, cloak, etc.) which risk allowing
moral indignation to win over legal principle
May be right to allow the veil to be pierced in some circumstances, but can’t be invoked merely
where there has been impropriety
It is necessary to show control of the company and impropriety by the wrongdoer at
the time of the relevant transaction
Application of joint/several liability here goes against Salomon
Company should be treated as being a person by the law in the same way as a human;
there were multiple levels of separation between him and the deal
None of the actual K’ing parties intended to K with M., and he did not K with them
M. never acted as if he was liable under the agreement
None of the facts involved RAP being used improperly; all of V.’s allegations are based on
misrepresentations of Nutritek which RAP had nothing to do with
Holding:
V.’s case fails; they cannot pierce the corporate veil to pursue M. or MCH
41
The defendant is entitled to structure the company for tax advantages and to
minimize the risk of liability.
The court also rejects the plaintiff’s “fraud theory” as the corporation was not set up
fraudulently. Had the legislation required that cab companies assume greater
insurance, it would have stated so.
Walkovsky should not be able to win the accident lottery by having access to deeper pockets.
Dissenting: Per Keating J
In this circumstance, legal personality is being abused.
Carlton is using the right to incorporate as an abuse of rights.
Carlton sets up a “flimsy corporation” to minimize liability.
The firm was intentionally under-capitalized.
Cab driving involves more than an “ordinary” risk.
Carlton anticipated the risk, which is why it under-capitalized. This shows concealment
and fraud.
Rationale:
The court was unwilling to disregard legal personality because the debtor was undercapitalized.
Holding:
No.
Problem of suing directors for inducing the breach of contract into which a
corporation they are directors of and the scope the Said v. Butt defence
London Drugs
Iacobucci: (majority)
Corporation and employees are separate legal persons
They each owe a duty of care to not commit tort against 3rd parties
The employees breached this DoC
Exception that allows them to have defence to it through exemption clause in the K
The 3rd party consensually entered into agreement with a LL-Co, and shouldn’t be able to
avoid defence
La Forest: (minority)
Hold on
In order to hold them in negligence, have to find a DoC
When employees are acting as the company, they don’t owe a DoC separate from the Co
*Majority reasoning allows obnoxious actions against employees where K is badly drafted
* First question is always: what is the interaction between the 3 rd party and the Co? K or Tort?
If it’s K, then look for limitation of liability
Said v. Butt
Facts:
B. was chairman/managing director of a theatre which S. often frequented. There was a falling out
between parties, S. began to openly criticize B. There was a big opera opening, and S. tried to get
tickets, but was refused. Instead he bought them through a friend. B. wouldn’t have sold them to him
otherwise. At the theatre, B. spotted S. and had him escorted out, tried to return his money to him. S.
brings action for B. knowingly inducing the theatre company to breach a K.
Issue:
Can an agent be held liable for inducing his principle to breach a K?
Reasoning:
Defendants case rests solely on ground that B. procured the theatre to break its K with S.
Before S. can succeed at trial, he has to establish that he actually had a K with the theatre company
Where a person is deceived as to the real person with whom he is K’ing and that deception
induces the K or renders its terms more beneficial for the deceiving party, the K cannot be
enforced against the deceived party
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S. knew that B. wouldn’t sell him ticket, cannot constitute himself a contractor simply by going
through another person
No K
If there were a K, could S. pursue B. (3rd party) for knowingly procuring a breach of his K with
theatre?
If it were so held, it follows that whenever a managing director/BoD/officer of a company
causes/procures a breach by that company of its K with 3 rd party, they could be liable to an action for
damages in Tort
Not technically piercing the corporate veil; establishing independent actionable wrong
* An action of this kind has been recognized where the third party is a stranger
But the acts of a servant/agent are in law the acts of his employer
It would be the master himself, by his agent, breaking the K, and such an action for the type
of dmgs sought must fail
Would open the floodgates of litigation
If a servant acting bona fide within the scope of his authority procures or causes the breach of
a K between his employer and a 3rd party, he does not thereby become liable to an action of
tort at the suit of the person whose K was thereby broken
Person who deals with Co cannot have available to them actions in breach of K against the Co
AND action in Tort against the individual directors
Holding:
Ruled for B.
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Hogarth v. Rocky Mountain Slate Inc.
Facts:
H. is pursuing R. and its directors personally for negligent misrepresentations made through 3
‘business plans’ concerning a slate mining opportunity.
Issues:
Was there negligent misrepresentation?
* Can the officers be held personally liable?
Reasoning: (O’Brien and Rowbotham)
Where the actions of a director are themselves tortious or exhibit a separate identity or interest from
that of the corporation so as to make the act/conduct their own, they may attract personal liability
Simonson (S.) didn’t exhibit this level of separate identity
Concurring: (Slatter)
Causation for N-M against the company requires two elements
1. But for representations, H. wouldn’t have invested the $
2. Damage would not have resulted if the representations had been true
o Where investor suffers losses that are unrelated to the misrepresentation,
defendant is not responsible
Three N-M alleged:
1. Expertise of management team
No N-M; plaintiffs were aware of the lack of experience of promoters
Finding N-M in this case comes close to saying that directors are liable for ‘negligent
management
2. Involvement of mining engineer
* YES N-M; but no sufficient causation
No evidence that the lack of an engineer caused the quarry’s problems
3. Compliance with regulatory standards
No N-M; rep was clearly directed towards the future, and M. was in compliance
Personal Liability
ScotiaMcLeod Inc v Peoples Jewellers: directors of a limited liability Co are not identified with the
company for purposes of legal liability
* For liability to be extended to directors, their actions must exhibit a separate identity or
interest from that of the company so as to make the act their own
Hercules Managements: normal test for establishing a DoC applies to N-M cases (with some
modifications; fundamental concern that “indeterminate liability” not be allowed)
Physical or economic damage? Reliance reasonably foreseeable? Intentional or non-
intentional tort? Etc.
ADGA Systems v Valcom: voluntarily dealing with corporation vs. stranger
Stranger should be able to pursue personally, volunteer should not
Cooper v Hobart: foreseeable and reasonable reliance?
* Independent factor runs through almost all of the jurisprudence
Co. should be presumptively responsible for any misrepresentations; individual liability
secondary only
Application
* Cooper acknowledged that expectations of parties are legitimate considerations, in specific realm of
N-M, Hercules held the ‘nature of the relationship’, ‘reasonableness of the reliance on
representations’ were key
It was reasonable for H. to rely on representations, but not to rely on S. as personal
guarantor
Cooper v. Hobart
1. Foreseeability/Proximity (reasonably foreseeable reliance)
a. Involves determining if proximity arises because defendant ought reasonably to
have foreseen that plaintiff would rely on representations made, and that
reliance was reasonable: Hercules
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b. Investors knew they were dealing with LLP; any reliance on personal liability of
S. was unreasonable: Hercules
2. Policy Considerations (at both stages)
a. Foreseeability Policy: Tort not sufficiently independent to engage S. personally;
reliance by the respondent on him personally was unreasonable
b. Residual Policy: Legitimacy of use of limited liability structure threatened
Holding:
Errors in conclusion that N-M were made. Also, Insufficient proximity to warrant personal liability:
policy considerations at both levels speak against it. Legitimate expectations of the parties don’t
support it; S.’s appeal allowed.
45
* 2nd Line of Authority: A person who is the controlling/directing mind of a corporate
trustee can be liable for an innocent or negligent breach of trust if the person
knowingly assisted in the breach of trust
Therefore only required that the trustee breached in ‘dishonest and fraudulent way’, and that the
directors knew of the trust and assisted
Application
ML placed monies it knew were not for general use in a general account and made
them subject to seizure; risk to the prejudice of A. the beneficiary that ML knew it had
no right to take = dishonest/fraudulent
Clear that M. and V. participated in the breach of trust; directly caused by them acting in
their own interest to stop payment on cheques; precipitated the bank seizure; they knew
about the trust agreement as directors (even if no knowledge, was at least willful
blindness)
Holding:
Directors are personal liable for the breach of trust in this situation.
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Citing Salomon, a legal entity is distinct from its shareholders. The court will lift the corporate veil
when the company acts as a mere agent or puppet of the controlling shareholder.
Those who have chosen the benefits of the corporate form have to assume some of the
risk.
This is not a corporate law problem – it is an insurance problem. The court held that Macaura did
not apply in this circumstance.
Kosmopoulos had an insurable interest as the sole shareholder of the company. But for
the fire, he was the sole beneficiary of the assets of the company. He benefited from the
existence of the assets and was prejudiced by their destruction. Wagering was not an issue. It
might have been had there been more shareholders (say 2, 5, 10, etc.).
The insurance company is raising a “technical objection” to deny insurance when
everyone knows that the corporation’s assets were meant to be the object of the
insurance.
K. had “Some relation to or concern in” the subject matter of the Co’s property
The oppression remedy is always available if some of the shareholders insure the assets of the
corporation and the corporation’s assets are destroyed (when there are multiple shareholders).
Secured creditors might be able to access those funds.
Rationale:
Sole shareholders retain the benefits of the assets of the corporation and can insure those assets.
Holding:
Yes. The court did not have to pierce the corporate veil to issue the proceeds.
See also Lee’s Farming for another example of single shareholder skirting the rules
*Sidebar: This case problematizes the one-shareholder corporation. It conflates the interests of the
sole shareholder with the corporation, even though they are distinct legal entities.
Courts are reluctant to engage in piercing the corporate veil for 1-person corporation. It is not
enough that there is 1 person. The corporation has to be an instrument to further the interests of the
individual; a sham.
47
This general test should not be limited to cases of physical damage; applies to economic loss
cases also [trying to fashion general test!]
Step One Proximity:
There is proximity in negligent misrep cases where the plaintiff reasonably relies:
o (a) the dft ought reasonably to foresee that the ptf will rely on his or her
representation; and
o (b) reliance by the ptf would be reasonable in the circumstances. The combination of
these factors creates a special relationship.
Step Two Policy Considerations:
[1] Indeterminate liability might result b/c auditor’s statements are used by many people, and it
is almost always reasonably foreseeable that they would rely on them.
[2] Deterrence of negligent conduct (i.e. concern that spectre of tort liability would be incentive
to produce accurate reports) is outweighed by limitless liability concerns.
[3] Economic inefficiency b/c of costs expended to insulate from liability, litigate, etc.
* In most cases of negligent misrep involving auditors, the indeterminate liability concern will
negate the prima facie duty. However, there may be some cases where the indeterminate
liability concern doesn’t arise, and thus duty not negated:
o Where the dft knows the identity of the ptf or a class of ptfs and
o Where the dft’s statements are used for the specific purpose or transaction for
which they were made.
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Houle v. Banque Canadienne Nationale
Facts:
Houle brothers were shareholders in a family company that had dealt with bank for over fifty years.
The company had a credit line with bank, including a “demand loan” (bank has the right to recall with
no notice). Just 20 days after signing new trust deed, bank recalled the loan. They took possession
and liquidated Houle’s assets just three hours later. The problem was that Houles were in the process
of selling their company (estimated to get $1 million). After this liquidation, they were forced to sell
at only $300,000. Shareholder brothers now taking action against bank, claiming difference of
$700,000 they would have received had it not been for the bank’s recall, which they claimed was
made in bad faith. Note that it is the shareholders, not the company (which no longer exists) suing
the bank.
JH:
Finding that bank had acted unfairly, both trial and appeal courts “lifted the corporate veil” and
awarded Houles $250,000 (what they estimate difference to be). Bank appealed.
Issues:
What are the criteria for abuse of contractual rights? What is the foundation for liability for abuse of
contractual rights?
What are the rights of third parties in this context?
Legal Reasoning: (L’Heureux-Dubé J.)
Recalling the loan and reasonable delay:
It is not contested by either party that the terms of the “demand loan” allowed the bank
to recall it on demand and realize its securities without notice.
In accordance with its rights, the bank did recall its loan and realize its securities. The question is
whether it abused its rights in so doing abuse can arise when otherwise valid contractual
rights are not exercised in a reasonable fashion.
Termination which occurs abruptly or brusquely, that is, without prior warning and
without giving a period of reasonable notice that will allow debtor to make
arrangements, may be abusive.
The recalling of the loan was not in itself an abuse of the bank’s contractual rights – but
now must examine reasonableness of the delay If the demand to repay is to have
any meaning, there must be a reasonable time given to respond to it. The purpose of
reasonable notice is to give debtor a change to make the repayment.
The bank was unjustified in acting the way it did
Houles had been doing business with the bank for over fifty years, and had always
fulfilled its obligations (no reason to think they wouldn’t get it).
It was so unexpected and so abrupt that the bank effectively prevented any chance
of the company meeting its obligation of repayment.
While the bank had right Not absolute, must be tempered by principle of reasonable
delay. Bank acted wrongfully and committed fault against Houle company.
* Rights of third parties:
The problem in this case is that the respondents are not the company – they are the
shareholders. As such, they are not parties to the contract in question.
Unlike lower courts, SCC refuses to “lift the corporate veil” the bank must have
committed a fault directly against respondents (independent of contract) to be held
liable.
Where does SCC find liability?
Bank knew about the deal Houles were making to sell their company. In such
circumstances, there is a general legal obligation that a person not prejudice the parties
to a sale when it knows such a sale to be imminent. Should the sale fail to materialize
or the price decrease due to conduct which constitutes fault, liability can be
triggered under 1053 CCLC (now CCQ 1457)
There was a direct relationship between Bank’s fault and the damage caused to respondents.
They were under a legal obligation (independent of contract) to act reasonably towards them
so as not to prejudice their sale. Failure to do so resulted in their injury (lower sale).
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Holding:
Bank’s recall constituted an abuse of their rights. Because they knew of the impending deal and the
effect that this would have on respondents, they were under a general duty to act reasonably towards
them and not prejudice the sale. Failure to do this triggers tort liability, but no K liability. Appeal
denied, CA ruling upheld.
Remedies
The Representative/Derivative Action
Hercules Managements Ltd. v. Ernst and Young
(See p46)
Foss v. Harbottle and derivative actions
The proper way to have brought this claim would have been as a derivative action rather than a
series of individual actions
Individual shareholders have no cause of action in law for any wrongs done to the
corporation, and if an action is to be brought in respect of such losses, it must be by the Co
itself (through directors) or by way of a derivative action
o As a derivative action for the shareholders as a cohesive body, the action is seen to
represent the corporation’s interest, not just the individual shareholders
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Shareholders cannot raise individual claims in respect of a wrong done to the corporation
o Only by establishing an independent actionable wrong can the individuals bring a claim
*Sidebar:
Criteria to get right to Derivative action:
1. Ask management to solve the problem
2. Have to show that their refusal is tainted
3. Have to get a majority of the shareholders behind you
1. Derivative Action
It is highly unlikely that a “toxic” board will bring an action against itself. The derivative action allows
a complainant shareholder to bring an action against the directors, on behalf of the corporation, with
leave of the court. The complainant must act in good faith and must demonstrate that the case is
“prima facie in the interests of the corporation” so as not to “harass” the directors (CBCA s.239).
2. Oppression Action
The provision gives the court the authority to remedy conduct that it considers to be oppressive with
remedies that are “just and equitable.” The remedy does not purport to deal with unpopular
decisions. It should not supplant the legitimate exercise of the Board’s power. The exercise of the
51
Board’s power must pass a threshold of oppressiveness (CBCA s.241).
The court will gauge the oppressiveness of conduct by looking at the “reasonable expectations” of the
injured party. The court will assess the following factors: (1) the protection of the underlying
expectation of a creditor in its arrangement with the Co; (2) extent to which the acts were
unforeseeable or the creditor could reasonably have protected itself; (3) the detriment to the
interests of the creditor
In this case, the landlord is not a “creditor” under the act because it does not hold a security (debt
obligation). However, the landlord does fall within the generalized category of “complainant” because
it is the proper person to make the application for a derivative action, but not the proper person to
make an oppression action:
1. There is no evidence that the directors used the corporation as a vehicle for committing a
fraud against the creditors (even though they may have perpetuated a fraud against the
corporation).
2. No breach of any underlying expectations (creditors did not have an expectation that the
signing bonus would remain with the corporation)
The “good faith” requirement is supposed to prevent private vendettas from being litigated. The
landlord is acting in good faith because it wants to ensure that the corporation has assets to fulfill the
breach of the lease claim (which the landlord will file/has filed).
The court also rejected the landlord’s oppression claim on the grounds that it did not affect the
interests of creditors. At the time that the landlord complained of the actions of the directors,
it did not owe the creditors a present obligation to pay the rent; the landlord had only a future
right to the rent. Creditor, when given its plain and ordinary meaning, does not apply in this
circumstance.
Rationale:
A landlord can file a derivative action on behalf of a corporation when the landlord seeks to recover
money used to satisfy rent and when the landlord is doing so in good faith.
Holding:
The landlord was the proper person to make a derivative claim and the court granted leave. The
landlord did not have a reasonable expectation that the corporate respondent would retain the
signing bonus and therefore it cannot sustain its claim for oppression.
*Sidebar:
“Underlying reasonable expectations” criteria carries through to cases afterwards: see BCE and
Downtown Eatery
52
Issues:
Is the oppression remedy open to A.?
Reasoning: (ONCA)
A. is allowed to pursue the respondents’ other companies under the common employer doctrine
Oppression Remedy
s.245 of OBCA (s.241 CBCA) states that a “complainant” viable to bringing an action under oppression
remedy can be anyone deemed by the court to be a “proper person”
G. (defendants) testified that the reorganization of the companies was due to union activities not the
upcoming trial
B. was company in charge of holding money for paying/managing employees under G.’s
companies
A. is seeking the oppression remedy absent bad faith to rescue himself from inability of B. to pay his
judgment, which resulted from G.’s decision to terminate B.’s business operations/suck all of its
funds
Trial judge failed to appreciate that oppressive conduct need not be undertaken with the intention of
harming the complainant
As long as it’s established that a complainant has a reasonable expectation that a Co’s
affairs will be conducted with a view to protecting his interests, the conduct doesn’t
require intention to harm
o See the criteria of “protection of underlying expectations” enunciated in First
Edmonton Place
Restructuring B. right before trial effected a result that was unfairly prejudicial to, or that unfairly
disregarded the interests of, A.; there was nothing A. could have done to prevent this from occurring:
see again criteria in First Edmonton Place
Holding:
A. can recover the amounts owed to him from the defendant’s companies and the defendants
personally.
53
2. P. argues the courts have granted shareholders a remedy for oppression despite the fact their
losses appear to be only consequential/incidental to the company’s loss through their loss in share
value
In most cases cited, oppression was only really recognized for wrongs to the company, and
the order was for oppressor to pay to the Co either directly or indirectly
Application
* An injury incidental to the injury of the Co is properly remedied through derivative action
* An injury separate and distinct from that of the Co and personal to the shareholder is
properly remedied by action in oppression
It is possible that a director’s actions can constitute a breach of fiduciary duty where Co can
sue and the basis of an oppression action based on separate injuries personal to the
shareholder
Wherever P. cannot show a loss other than to his share value in Fleetwood equal to the loss of
share value experienced by C., he cannot bring oppression; they are properly actions that
must be brought by the Co or on its behalf as derivative
Fleetwood is only Co that oppression is alleged in
Even if oppression is found, share value of Fleetwood is nil so reduction of share price for
purchase by P. serves no purpose
o Cannot transfer the remedy to reduce share prices of other companies C. has
interests in; no oppression alleged in other companies, and they are separate legal
entities
Holding:
Ruled in favour of C.
Oppression Remedy II
BCE Inc. v. 1976 Debentureholders [2008]
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