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THE "JILTED SPOUSE" ~ SHAREHOLDERREMEDIES FOR OPPRESSIVE CONDUCT

. phese materials were prepared by Richard Danyliuk; of McDougall Gauley law firm Saskatoon,Saskatchewan for the Sask~tchewan Legal Education Society Inc.s~minar, Corporate Divorce;No"ember2004.

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The "Jilted Spouse" -Shareholder Remedies for Oppressive Conduct

Richard W. Danyliuk, McDougall Gauley

1. This paper is part of is SKLESI's seminar entitled "Corporate Divorce". When,

sadly, the corporate marriage comes to an end it is for a number of reasons.

As with other, more traditional forms of divorce, some of these are assessed

as fault-based. The oppression action is one such item, and it has attracted

significant attention within Saskatchewan in the last 10 to 15 years. This

paper covers the following subjects:

I. Legislative Framework;

II. Qualifying for the Remedy;

III. Conduct Falling Within the Act;

IV. Remedies; and

V. Strategic Concerns and Possibilities.

I. LEGISLATIVE FRAMEWORK

2. The oppression remedy is rooted in Section 234 of the Business Corporations

Act (hereafter "BCA"). Section 234 reads, in part, as follows:

(1) A complainant may apply to a court for an order under this section.

(2) If, upon an application under subsection (1), the court is satisfiedthat in respect of a corporation or any of its affiliates:

(a) any act or omission of the corporation or any of its affiliatesaffects a result;

(b) the business or affairs of the corporation or any of its affiliatesare or have been carried on or conducted in a manner; or

(c) the powers of the directors of the corporation or any of itsaffiliates are or have been exercised in a manner;

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that is oppressive or unfairly prejudicial to or that unfairly disregards theinterests of any security holder, creditor, director or officer, the courtmay make an order to rectify the matters complained of.(3) In connection with an application under this section, the court may

make any interim or final order it thinks fit including, without limitingthe generality of the foregoing:

(a) an order restraining the conduct complained of;

(b) an order appointing a receiver or receiver-manager;

(c) an order to regulate a corporation's affairs by amending thearticles or bylaws or creating or amending a unanimousshareholder agreement;

(d) an order directing an issue or exchange of securities;

(e) an order appointing directors in place of or in addition to allor any of the directors in office;

(f) an order directing a corporation, subject to subsection (6), orany other person, to purchase securities of a security holder;

(g) an order directing a corporation, subject to subsection (6), orany other person, to pay to a security holder any part of themoneys paid by him for securities;

(h) an order varying or setting aside a transaction or contract towhich a corporation is a party and compensating thecorporation or any other party to the transaction or contract;

(i) an order requiring a corporation, within a time specified bythe court, to produce to the court or an interested personfinancial statements in the form required by section 149 or anaccounting in such other form as the court may determine;

m an order compensating an aggrieved person;

(k) an order directing rectification of the registers or otherrecords of a corporation under section 236;

(I) an order liquidating and dissolving the corporation;

(m) an order directing an investigation under Division XVII to bemade;

(n) an order requiring the trial of any issue.

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3. The legislature designed this remedy to provide quick, summary relief (where

appropriate) to parties holding an interest in a corporation. It was not intended that

all such cases use the classic civil action or even proceed to trial, although it is clear

this is contemplated in some instances (see s. 234(3)(n)). As stated by Dennis

Peterson in Shareholder Remedies In Canada (Markham: Butterworths) at p. 18.14,

the oppression remedy is an equitable remedy. It is designed to protect the interests

of corporate stakeholders in a variety of corporate circumstances. It is a creature of

statute and certain essential elements must be present if a court is to have

jurisdiction to invoke the remedy. The grounds for relief include, not only conduct

that is oppressive, but also conduct that is unfairly prejudicial to or unfairly disregards

the interest of any security holder, creditor, director, or officer. And although in a

particular fact situation no single event may qualify as oppressive or unfairly

prejudicial conduct, conduct may be considered oppressive or unfairly prejudicial

when various events are considered together.

4. It also seems clear that this portion of the BCA is not to be read in isolation.

Rather, it is part of a cumulative bundle of rights and remedies provide by the BCA.

For example, there is power in the Court (Division XVII) to order an investigation of

internal corporate affairs. That power is separate and distinct from the oppression

application, yet related to it. While this paper concentrates on the oppression

remedies, readers are urged to utilize all of the BCA's provisions in assisting their

clients.

5. These provisions have often been referred to as "minority" shareholders' rights

upon oppression. That is something of a misnomer, although many (if not most) of

these matters involve unfair action taken by the majority against the minority within a

company. However, one should be aware that being in the "minority" is not a

prerequisite to taking action under s. 234 BCA. For example, in Serhan Family

Trust et al v. Poncelet, [2003] S.J. No. 103 (Q.B.), Kyle J. granted remedies where

the two shareholders each owned 50% of the issued shares.

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II. QUALIFYING FOR THE REMEDY

6. While being in the "minority" is not a condition precedent to launching an

application under s. 234, it is necessary to qualify under the BCA for relief. In order to

obtain relief pursuant to the BCA, an applicant must firstly show that it is a

"complainant" within the meaning of s. 234(1), BCA. This is defined in the BCA as

follows:

231. In this Division:

(b) "complainant" means:

(i) a registered holder or beneficial owner, and a formerregistered owner or beneficial owner, of a security of acorporation or any of its affiliates;

(ii) a director or an officer or a former director or officer of acorporation or any of its affiliates;

(iii) the Director; or

(iv) any other person who, in the discretion of the court, is aproper person to make an application under this Division.

7. Generally, these applications are brought by aggrieved shareholders, who are

clearly complainants within the meaning of this provision. However, current or former

officers may bring the application even if they have no ownership interest in the

company. In Serhan, supra, the applicants were the 50% shareholder (the family

trust) and one of the directors (Serhan). Both had standing before the Court.

8. Also see Bai.lscher-Grant Farms Inc. et al v. Lake Diefenbaker Potato

Corporation et ai, 199__. There, a limited partnership made up of corporate

partners was in issue. The applicant was a company which was never issued shares

in the corporate general partner. It alleged this was because the company had acted

oppressively; the company responded by saying the applicant had failed to honor its

conditions precedent to becoming shareholders. The applicant was held to have a

sufficient interest to bring this type of application. At paragraph 17 Baynton J. stated:

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Any IIcomplainant" is entitled under s. 234(1) to bring an 1I0ppressionllapplication. Section 231 defines a IIcomplainantll to include a registered holderor beneficial owner (including a former holder or owner) of a security of acorporation. A IIsecurityll is defined by s. 2(1 )(bb) as including a share of acorporation.

3. G.A. Smith, J. considered the "complainant" issue at paragraphs 70,71 and 83

of Beechy Stock Farm (1996) Ltd. et a/ v. SP/ Marketing Group Ltd., [2003]

S.J. No. 704 (Q.B.). She held one of the applicants was not a complainant

because no shares in the defendant company had been issued to it. She

found that complainant had no status to bring the application. She noted,

however, that she had not been provided with any authority in this regard and

it does not appear the Bauscher-Grant case had been drawn to her attention.

Similarly, it does not appear she was referred to Murphy v. Phillips (1993),

12 BLR (2d) 58 (Ont. G.D.). There, the owners of a car dealership agreed to

sell their shares to a senior employee over a prolonged term. The owners

sought to avoid the agreement by manufacturing complaints against the senior

employee and alleging he had breached his obligations under the share

purchase agreement. O'Driscoll J. held the applicants had standing to bring

the application. He further strongly rebuked the majority shareholders and

held their conduct to be both oppressive and unfairly prejudicial to the interest

of the senior employee/minority shareholder. At page 87 he stated:

In my view their actions demonstrate a flagrant attempt by RCP andTAK [the majority] to disregard contractual obligations and a unilateralattempt to change all of the rules that had been agreed to by the partiesto the September 1987 Share Purchase Agreement.

9. As well as determining whether your client is a "complainant" under the SCA,

counsel should never forget to consider jurisdiction. For example, see Axis

Management Inc. v. A/sager, [2000] S.J. No. 535 (Q.B.). There, SCA remedies

(Le. a derivative action) were sought against a company incorporated in Texas, and

extra-provincially registered here. All of the "players" hailed from Saskatchewan.

Arguably, all of the improper dealings also occurred here. However, it was

successfully argued that the Saskatchewan court had no jurisdiction. The rights in

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issue were matters relating to the status and power of a corporation; therefore, the

laws of that corporation's domicile must prevail (in this case, Texas). Rothery J.

determined she had no jurisdiction to act. It therefore appears the oppression

remedies under the SCA only apply to Saskatchewan corporations.

III CONDUCT FALLING WITHIN THE ACT

10. Having established standing, it is submitted that an applicant must now

endeavor to show two things:

(a) that the Respondents' conduct falls within one of the descriptions

contained in sections 234(2) (a), (b) or (c) of the BeA;

(b) that the Respondents' conduct is "oppressive", "unfairly prejudicial

to", or "unfairly disregards the interests of" a security holder,

creditor, officer or director of the Company.

11. In general, the onus under section 234 SCA lies with the applicants. Case

authority to this effect includes:

Tsui v. International Capital Corp., [1993] 4 WWR 613 (Sask. Q.B.);affirmed [1993] 4 WWR 1xvii (Sask.C.A.);

Beechy Stock Farm (1996) Ltd. et al v. SPI Marketing Group Ltd.,supra.

12. The standard of proof applicants must meet on this type of application is on a

balance of probabilities:

Tsui v. International Capital Corp., supra;

Miller v. F. Mendel Holdings Ltd. (1984), 30 Sask. R. 298 (Q.B.);

Wark v. Kozicki et al (1997), 153 Sask. R. 127 (Q.B.); and

Ceapro Developments v. Canamino Inc., (1996), 146 Sask. R. 117(Q.B.).

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13. The type of conduct subject to review under s. 234 BCA is broadly stated to

include acts or omissions of the company or any affiliate, the manner in which the

business and affairs of the company or any affiliate has been conducted, and the

manner in which the powers of the directors of the company or any affiliate have

been exercised. See s. 234(2). The precise conduct of which the applicant

complains must be set out in the affidavit material filed on behalf of the applicant.

Note that this type of application is generally considered to be final, not interlocutory,

and therefore no hearsay should be adduced in the affidavits.

14. In considering s. 234 (and equivalent sections in other jurisdictions), courts

have held that this provision should be construed broadly and liberally. "The

legislation is remedial and is to be given a broad interpretation": 347883 Alberta Ltd.

v. Producers Pipelines Inc., [1991] 4 WWR 577 (Sask. C.A.), per Sherstobitoff J.A.

at page 601.

15. An identically worded section in the Canada Business Corporations Act was

interpreted by the Ontario Court of Appeal in Re Ferguson and Imax Systems

Corp. (1983) 150 DLR (3d) 718. Brooke J.A. said this section "must not be regarded

as being simply a codification of the common law". He declared that "the section

should be interpreted broadly to carry out its purpose". He emphasized the flexibility

of the oppression remedies, as other judges have done in dealing with such

legislation. After reviewing several cases, the Ontario Court of Appeal concluded at

page 727:

They establish primarily that each case turns on its own facts. What isoppressive or unfairly prejudicial in one case may not necessarily be soin the slightly different setting of another.

16. The approach taken by Saskatchewan courts has grown in its consistency

over the years. The approach to be taken is summarized in Wind Ridge Farms Ltd.

et al v. Quadra Group Investments Ltd. et al (1999), 180 Sask.R. 231 (C.A.). As

stated by Vancise J.A. at paragraphs 30,31,37 and 38:

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1. The onus of proof rests with the person claiming the remedy on a balanceof probabilities.

2. Oppressive conduct is at the lowest a visible departure from the standardof fair dealing and a violation of the conditions of fair play on whichshareholders who entrust their money to a company are entitled to rely.(...) Oppressive conduct has also been described as a lack of probity andfair dealings in the affairs of the company to the prejudice of some portionof its members

3. The terms 'unfair' and 'prejudice' are defined as conduct that is unjust andinequitable and unfairly prejudicial.

4. Section 234 is remedial legislation for the relief of minority shareholdersand it sot be given a broad interpretation.

5. Relief may be given upon proof of unfair prejudice to, or disregard of ashareholder's interest.

6. The section should be interpreted broadly to carry out its purpose.

7. Each case will be decided on its own facts: what is oppressive or unfairlyprejudicial in one case may not necessarily be so in a different set ofcircumstances.

(...)

In essence there are two branches to an application under s. 234 of the Act.The first is the claim for oppression which can be successfully resisted if themajority acted bona fide. The second is whether the action or actions of themajority were unfairly prejudicial to the interests of the minority or, in otherwords, whether the majority unfairly disregarded the minority's interests. Noelement of bad faith or lack of bona fides is required to obtain a remedy underthis branch of the applicant. It is the effect or the result of the activity and notthe intention that is crucial. That two-fold approach was adopted by this courtin Eiserman v. Ara Farms Ltd. where Sherstobitoff, J.A., writing for the majoritystated that "it must be noted that under s. 234, the conduct need not bedeliberate - it is sufficient if the conduct has the effect of being unfairlyprejudicial".

Thus, a finding that the majority acted bona fide is not a complete answer tothe claim for relief under s. 234. The court must also examine the secondbranch of the application and determine whether the conduct was unfairlyprejudicial to the applicant or the actions unfairly disregarded the interests ofthe minority.

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17. The conduct giving rise to the oppression remedy under s. 234 SeA is almost

infinitely various. As stated in Re H.R. Harmer Ltd., [1958] 3 All E.R. 689 (Eng.

C.A.) at page 698:

Inevitably the result of applications under s. 210 in different cases mustdepend on the particular facts of each case, the circumstances in whichoppression may arise being so infinitely various that it is impossible todefine them with some precision.

18. More importantly, the acts or omissions complained of must not be considered

in isolation. Other impugned conduct must be considered; the overall context is

important. The acts must be considered cumulatively. See Loveridge Holdings

Ltd. v. King-Pin Ltd. (1991), 5 BlR (2d) 195 (Ont. C.A.), at page 201:

In my view, the applicant has satisfied the onus on her to show that shehas been unfairly prejudiced by the actions of the respondent. ( ... ) Imust say that not all of the categories outline by Rosen would have ledto this conclusions, but the cumulative effect of his findings does.

19. Other leading cases of similar effect include:

Naneff v. Con-Crete Holdings Ltd. (1994), 11 BlR (2d) 218 (Ont.G.D.);

Wark v. Kozicki, supra.

20. It must also be noted that bad faith is not a prerequisite to the granting of relief

under the oppression remedy. The authorities are clear that, in allowing review for

acts or omissions which are "unfairly prejudicial" to a corporate stakeholder, it is not

necessary to show bad faith on the part of the corporation or the majority. See Brant

Investments Ltd. v. KeepRite Inc.(1991), 80 DlR (4d) 161 (Ont. C.A.), per

McKinlay J.A. at page 173; then at page 176 it is stated:

. . . I am of the view that a requirement of bona fides wouldunnecessarily complicate the application of the provision and add ajudicial gloss that is inappropriate given the clarity of the words used.Of course, there may be many situations where the rights of minorityshareholders have been prejudiced or their interest disregarded,without any remedy being appropriate. The difficult question is whether

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or not their rights have been prejudiced or their interest disregarded"unfairly". In testing the facts in a given case against the word"unfairly", evidence of bad faith as to motive could be relevant, but theremay be other cases where particular acts effect an unfair result, butwhere there has been no bad faith whatsoever on the part of the actors.

Also see Wind Ridge Farms, supra.

20. Further, it is not necessary that corporate conduct constitute a breach of

fiduciary duty in order to support a request for s. 234 BCA relief: Deluce Holdings

Inc. v. Air Canada (1992), 12 O.R. (3d) 131 (Ont. G.D.). Certainly, however, breach

of fiduciary duty can amount to oppressive conduct, and such breach alone will

satisfy the test of demonstrating oppression. See Calmont Leasing Ltd. v. Krehl,

[1993] 7 WWR 228 (Alta. Q.B.).

21. Note that some authorities indicate it is only conduct which has already

occurred which attracts the attention of s. 234 BCA. Future conduct or anticipated

misbehavior may not fall within the ambit of this legislative provision. For example,

see Diamond Dog Management Inc. v. D.M. Biehn Holdings Ltd., [2003] S.J. No.

297 (Q.B.) and Alexander v. Bar SP Ranches Ltd. (1999),190 Sask.R.1 (Q.B.).

22. Saskatchewan courts have interpreted each of the enumerated grounds for

relief (oppressive conduct, unfairly prejudicial conduct; conduct that unfairly

disregards the interests of a complainant) as being distinctive in nature. See Miller

v. F. Mendel Holdings, supra. At page 306 Wimmer J. held that each of these

grounds are ''to be regarded as being mutually exclusive, each applying as well to

isolated acts as to a continuing course of conduct". Of similar effect are the decisions

of this Court in Wark v. Kozicki, supra, and Bernard v. Montgomery (1987), 60

Sask. R. 20.

23. Therefore, counsel acting for an applicant must carefully evaluate which

category impugned conduct fits within. But it is this writer's view that counsel must

go further, and draw a link amongst the conduct and categories, to show an overall

course of conduct that is improper. The cumulative effect of bad corporate behavior

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cannot be ignored, and should be used as a tool to advance the cause of the

oppressed party.

24. Each of the thre'e separate enumerated grounds is worthy of separate

consideration.

Oppressive Conduct

25. With respect to the ground for relief based on "oppressive conduct" the leading

case remains the oft-cited decision of the House of Lords in Scottish Co-Operative

Wholesale Society Ltd. v. Meyer, [1958] 3 All E.R. 66. There, the House of Lords

defined "oppressive" to mean "burdensome, harsh and wrongful". Further,

oppression was held to include:

a lack of probity and fair dealing in the affairs of a company to theprejudice of some portion of its members;

a visible departure from the standards of fair dealing;

a violation of the conditions of fair play on which every shareholder whoentrusts his money to a company is entitled to rely.

26. This definition of "oppressive" has been adopted on many occasions by

Canadian courts, including those of Saskatchewan. See:

Eiserman v. Ara Farms Ltd. (1988), 62 DLR (4d) 498 (Sask. e.A.);

Re Keho Holdings Ltd. (1987), 38 DLR (4d) 368 (Alta. e.A.);

Re National Building Maintenance Ltd. [1971] 1 WWR 8 (SSeS);affirmed at [1972] 5 WWR 410 (SeCA); and

Aquino v. First Choice Capital Fund Ltd. et al (1995), 130 Sask. R.252 (Q.B.).

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27. This is an inclusive definition. No case purports to define the term )

exhaustively. Counsel should be imaginative in determining conduct which fits under

this test. However, given the comments below as to the breadth of the other two

branches of s. 234 SCA, it may be that the "oppression" portion of the remedy has

been reduced in importance.

28. Sometimes, as in Serhan, supra, this conduct will be obvious. There, a 50%

shareholder used corporate funds to make personal loan payments, make payments

to his wife and mistress, to travel on personal matters, and for a host of other

unjustifiable reasons (paragraph 5). The conduct was held to be oppressive.

29. Other times, the conduct may be more subtle, such as a gradual erosion of a

particular shareholder's rights over time.

Unfairly Prejudicial Conduct

30. This phrase has been held to offer much wider protection than is offered by

the word "oppressive". For example, see Safarik v. Ocean Fisheries Ltd. (1993),

10 BLR (2d) 246 (BCSC).

31. The phrase "unfairly prejudicial" was first considered in detail in Diligenti v.

TWMD Operations Kelowna Ltd. (1976), 1 BCLR 36 (BCSC), at page 45. It was

held that by adding the words "unfairly prejudicial" as a ground of relief, the

Legislature must have intended that the courts would give those words "an effect

different from and going beyond that given to the word 'oppressive"'. Fulton J. stated

at page 46:

It is significant that the dictionary definitions support the instinctivereactions that what is unjust and inequitable is obviously also unfairlyprejudicial. (...) Prejudicial, according to the dictionary, meansdetrimental or damaging to his rights, interests, etc. I consider,however, that the new provision is not to be so narrowly interpreted orits effect so narrowly confined [ie. to legal rights], for to do so would be

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to deal with it as though the word was still "oppressive". I consider thatthere are rights - Le. equitable rights - attaching to the position of theapplicant as shareholder in circumstances present here, in respect ofwhich he has been unfairly prejudiced, and in reaching this conclusion Irely upon and respectfully adopt the reasoning of Lord Wilberforce asdistilled from a perusal of the whole of his jUdgment in the Ebramimicase.

32. Fulton J.'s judgment has been approved in Saskatchewan in numerous cases,

including:

Eiserman v. Ara Farms, supra;

Miller v. F. Mendel Holdings, supra; and

Tsui v. ICC, supra.

33. In Wind Ridge Farms, supra, the Court of Appeal found conduct need not

even be deliberate, as long as it has the effect of being unfairly prejudicial. The

majority can, therefore, inadvertently prejudice the minority in an unfair manner.

34. This aspect of s. 234 SCA is quite broad, and impugned conduct can often

easily be fit under this portion of the test.

Conduct Which Unfairly Disregards Interests

35. The final ground of relief under s. 234 BCA is that the impugned conduct of the

corporation or any of its affiliates "unfairly disregarded" the interests of the

complainant. This has been held to be the least rigorous ground to prove to obtain a

remedy: Sexsmith v. Intek Inc., [1993] O.M. No. 711.

36. In Stech v. Davies, [1987] 5 WWR 563 (Alta. Q.B.) Egbert J. held at page

569 that "unfairly disregard" means:

To unjustly or without cause, in the context of s. 234(2), pay noattention to, ignore or treat as of no importance the interest of securityholders, creditors, directors or officers of the corporation.

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37. Also see Such v. RW-LB Holdings Ltd. (1993), 11 BlR (2d) 122 (Alta. Q.B.)

at 143:

The burden of proof of unfair prejudice or disregard is less rigorous thanthe burden of proof of oppression because as stated what is at issue isthe unfair result, not a state of mind. In a sense, these broader groundshave absorbed the oppression ground. Once established, the court isgiven very broad powers to redress that result.

38. In general, while applicants/complainants must prove one of the three modes

of transgressing s. 234 BCA, the burden is not overly difficult to meet.

39. There is unresolved judicial and academic debate over whether conduct which

defeats or offends shareholder expectations can fall within s. 234 BCA. Some cases

have found the circumstances appropriate to award relief for such disappointed

expectations. For example in Tsui, supra, immigrant investors had been induced to

invest their funds with the defendants on the basis that 30% would go into

guaranteed investments and 70% would go into debentures of publicly-traded

Saskatchewan companies. The company did not follow this plan, and the breach

was wholesale and not trivial. The court found this to be deceitful, as the reasonable

expectations created by these representations were breached. A director of the

defendant immigrant fund was removed.

40. Further support for this concept may be found in Welling, Bruce: Corporate

Law In Canada: The Governing Principles (Toronto: Butterworths, 1984) at page 533:

"thwarted shareholder expectation is what the oppression remedy is all about" as

long as those expectations were reasonable.

41. However, these principles were considered in WaterGroup Co. et al v.

Stevens et al (1996), 140 Sask.R. 245 (Q.B.). Matheson J. discusses these ideas

at paragraphs 47 to 49, and states at 49: "Simply because a shareholder's interest

has been disregarded, or his legitimate expectations thwarted, does not necessarily

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mean the shareholder is entitled to relief. The interest must have been unfairly

disregarded and some injury thereby ensued." Matheson did not grant relief for such

thwarted expectations. He took the approach that courts should be cautious in

tampering with the internal workings of a company, stating at paragraph 60: "Courts

should not usurp the functions of the board of directors in managing a corporation."

42. Shareholder expectations should therefore not be ruled out when considering

alleged oppressive conduct under s. 234 BCA.

43. Incidents amounting to conduct which transgresses one (or more) of the

enumerated items in s. 234 are many and varied. Particular attention must be paid to

the effect of such acts or omissions, and not just to their inherent nature. The

differing ''tests'' of each of the three grounds must be applied to each impugned act,

to see whether (or where) the conduct fits within s. 234.

IV REMEDIES

44. Section 234 BCA extends to the Court jurisdiction to "make any interim or final

order it thinks fit". The subsection provides specific examples of the types of orders

that may be granted, but "without limiting the generality" of this plenary jurisdiction.

Following this description of the Court's plenary jurisdiction, a list of 14 specific types

of orders are listed. Care must be taken by counsel not to limit one's approach to the

matter of remedies, as the definitions of same in s. 234 are inclusive and not

intended to be exhaustive.

45. The Court's remedial powers under s. 234 are to be construed liberally, to

ensure that on both an interim and final basis justice is secured between the parties.

Perhaps the clearest statement of this proposition is found in the decision of Blair J.

at pages 149 - 150 of Deluce Holdings Inc. v. Air Canada, supra:

The court has a very broad discretionary power under the oppressionremedy legislation to select a remedy appropriate to the situation at

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hand. Its mandate is to 'make any interim or final order it thinks fit'.This discretion must be exercised in accordance with judicial principles,of course, and within the overall parameters of corporate law.Nonetheless, the remedy has been described by one earlycommentator as 'beyond question, the broadest, most comprehensiveand most open ended shareholder remedy in the common law world ...unprecedented in its scope'. (...) Courts are prepared to be creativeand flexible in fashioning remedies to fit the case when called upon toapply this broad remedy.

46. The relatively recent case of Beaubien v. Campbell, [2003] S.J. No. 301

(Q.B.) is instructive. That case dealt with claims of oppressive behavior in a closely­

held corporation. Beaubien, the applicant, had been treated harshly by Campbell.

He had been docked pay because he had not filled out some internal forms, and

because "his office was messy". He was denied access to corporate financial

records. Ultimately, he was fired from the company with a year's working notice.

47. The conduct was held to violate s. 234. As part of the remedy Campbell had

to buy Beaubien's shares, as well as repay a shareholder's loan and pay for back

wages. Dawson J. dealt with remedies starting at paragraph 78 of her judgment. In

determining which were appropriate she referred to the Court of Appeal in Wind

Ridge Farms, supra, paragraphs 43 and 44:

The wording of s. 234 makes it clear that the court has the power to ignore thetechnical rules binding the shareholders and to apply some unspecifiedcombination of fair play and legitimate shareholder expectations to resolve thedispute the shareholders are unable to resolve themselves. Typically itinvolves a situation where the majority has all the strict legalities on its sidewhile the minority have all the equities. The intent of the section is to protectthe interest of the minority and to provide it with an appropriate remedy.

What then is the appropriate remedy to redress the unfairly prejudicial conductof the respondents in attempting to force the appellants to accept a valuationof their Class A shares in the respondent companies? Any remedy must notonly protect the interest of the minority shareholders but also take into accountthe legitimate interests of the majority shareholders.

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48. Thus there must be some balance in the remedy process. The majority may

have transgressed the boundaries of fair play, but they have legitimate ownership

and control interests that cannot be ignored by the Court.

49. There must also be consideration of the respective positions of the parties, as

they exist at the date of adjudication. Restoring a shareholder or director to his or her

previous position may be untenable, as there is no faith or trust left within the group.

This was the case in Beaubien, but also in cases such as Lee v. To (1997), 153

Sask.R.58.

50. In Lee, the Court of Appeal discussed s. 234 remedies at paragraphs 14 to 28.

Ultimately, it partially applies the "expectation" analysis discussed above, with the

parenthetical comment that this appears to be best applied to closely-held

corporations than to a larger company (see paragraph 18). The Court seems to

endorse, cautiously, an creative and interventionist approach to remedies. "One size

does not fit all" seems to be the end result.

51. Note also that cases such as Lee, as well as Taylor v. La Reata Ranch Ltd.,

[2003] S.J. No. 794 (Q.B.) recommend that full viva voce hearings be held prior to

making monetary awards under s. 234. There may be circumstances where this

cannot be done, but it should be the court's first resort.

52. A short note on interim remedies. While seeking interim relief is clearly

allowed, the cases suggest the onus is higher and that to obtain such interim relief,

the applicant must essentially show a prima facie case. This can be difficult, and

should be approached with care. It is far easier to obtain a preservation order

maintaining the status quo than to obtain some more substantive interim relief.

53. One of the remedies available is, of course, costs. One may seek an order

that the company pay solicitor-client costs to the applicant, under Section 234(3)0).

) To justify this request, counsel must be ready to demonstrate the applicant falls

within the definition of "aggrieved person": see Lunn v. BCL Holdings Inc. (1996),

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150 Sask. R. 258 (Q.B.), per Dawson J. At page 269 she held that once a finding is

made that acts are unfairly prejudicial to the complainants, they become aggrieved

persons. Solicitor-client costs do not always follow the event in these proceedings.

V STRATEGIC CONCERNS AND POSSIBILITIES

54. A number of very practical considerations are proposed for the reader's

consideration.

55. Money. These are not easy actions to bring. They will take a huge amount of

your time. They will inevitably cost more than you initially think. Quote high on fees,

and you will seldom be disappointed.

56. A further monetary concern is whether your client has the resources to pursue

the matter. This should be checked at the outset. Get a retainer. Get the client to

sign a retainer agreement. Be clear that you are providing your best fee estimate, as

opposed to a guarantee as to the ultimate cost. Frequently, the matter starts in

Chambers then mutates into a multi-stage trial. Conversely, consider whether the

company being attacked is capable of providing any remedy to your client, monetary

or otherwise. If the corporation is a sinking ship, there's little use in convincing your

client to re-board.

57. A further, albeit minor, concern pertains to process. This is not an "action"; s.

234 refers to an "application" being made. A Statement of Claim is not reqUired and

would seem to defeat one of the purposes behind s. 234: quick access to justice.

Some counsel commence using a Notice of Motion. This writer prefers the

Originating Notice, which allows counsel to convey substantial information to the

court on first reading, yet does not amount to formal pleadings.

\)

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58. Also consider, from a strategic viewpoint, the difference between a closely­

held company and a larger enterprise. Differences in approach are called for, as

illustrated by Beaubien.

59. Also, from time to time you may be called upon to consider this from the other

side. Not only might you be defending such an application, from a corporate

planning perspective you may want to instigate one on behalf of the majority. To rid

itself of a weak and/or greedy player, majorities of corporations have sometimes

intentionally acted in an overbearing, harsh or prejudicial manner toward the minority.

This is done knowing it will trigger an application being brought. Nevertheless, the

end result is the company rids itself of a thorn in its side, sometimes at a lower cost

than negotiations would bring. While inducing corporate divorce through bad

behavior is risky, it is a useful tool in the corporate solicitor's arsenal.

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