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Corporations - Directors and Officers. Evashkow v. Melia [oppression remedies/director removal]
In Evashkow v. Melia (Div Ct, 2025) the Divisional Court dismissed an OBCA oppression [s.248] appeal, here brought against a court order that removed a joint corporate CEO/director.
Here the court considers remedies allowed under OBCA s.248(3) ['Oppression remedy - Court order']:Issue 5 – Did the Application Judge err in removing Mr. Evashkow as an officer and director?
[39] The Appellant submits that his removal as officer and director was an extraordinary remedy that the Application Judge granted without sufficient factual and legal basis for doing so.
[40] Section 248 of the OBCA gives the Court broad discretion to make “any interim or final order it thinks fit.” Section 248(3)(c) [SS: sic, should be '248(3)(e)'] of the OBCA expressly authorizes the Court to make an order “appointing directors in place of or in addition to all or any of the directors then in office.”
[41] The choice of an appropriate remedy is a discretionary decision that attracts a high degree of deference. Absent a reviewable error of fact or law, a reviewing court generally will not interfere if the judge below “has given sufficient weight to all relevant considerations and the exercise of discretion is not based on an erroneous principle”: Canada (Attorney General) v. Fontaine, 2017 SCC 47, [2017] 2 S.C.R. 205, at para. 36.
[42] Having said that, removal of a director is an extraordinary remedy that should be imposed sparingly. However, an order for removal of a director “could be suitable where the continuing presence of the incumbent directors is harmful to both the company and the interests of the corporate stakeholders, and where the appointment of a new director would remedy the oppressive conduct”: Stelco Inc. (Bankruptcy), Re (2005) 2005 CanLII 8671 (ON CA), 75 O.R. (3d) 5 (C.A.), at para. 55 citing Catalyst Fund General Partner I Inc. v. Hollinger Inc., 2004 CanLII 40665 (ON SC), at para. 68.
[43] Where an oppression remedy is found to be warranted to correct an oppressive situation, “the surgery should be done with a scalpel, not a battle axe”. An important consideration is that the court must, in granting a remedy, “even up the balance not tip it in favour of the hurt party”: Naneff v. Con-Crete Holdings Ltd.,1995 CanLII 959 (ONCA), at pp. 490-491.
[44] The circumstances at blueRover Inc. under Mr. Evashkow’s leadership as CEO, were of the nature contemplated by the Court of Appeal in Re Stelco. Having found that Mr. Evashkow’s conduct had “exponentially” increased the level of dysfunction and acrimony in the corporation, the Application Judge concluded that his removal was required:I pause to observe that Evashkow himself is not a shareholder of blueRover. He has no stake in the equity of the company. He became involved, as described above, as the nominee of Kozar [of Korona Group] to the Board. I am satisfied that it would be inappropriate for him to continue as a Director or officer: Disposition Reasons, at para. 136. [45] Courts often exercise caution in removing a director when doing so interferes with the will of the shareholders. That was not a factor in this case. Mr. Evashkow was not elected by a vote of the shareholders. He was appointed by one of the shareholders, the Korona Group. To the extent that Mr. Evashkow’s removal interfered with the authority of the shareholder who nominated him, that shareholder (Korona Group Ltd.) took no part in this appeal. Korona Group also retained its authority to appoint a new CEO following Mr. Evashkow’s removal.
[46] We conclude that the Application Judge considered and applied the relevant principles to the record before him. The remedy of Mr. Evashkow’s removal was responsive and proportionate to the business realities. Further, his order for removal does not disturb the Board’s balance of power, as the party that nominated Mr. Evashkow was able to nominate his replacement.
[47] We give no effect to this ground of appeal.
D. Conclusion
[48] The Application Judge made orders within his discretion that were supported by findings on the evidence before him. The Appellant has failed to establish that he erred in doing so. We find the Application Judge’s orders were informed by appropriate considerations of business realities and that the remedies appealed – including removal of Mr. Evashkow as director – were ordered only after the Application Judge was satisfied, following court-monitored interim operation of blueRover, that such orders were necessary. . Lee v. Lalu Canada Inc.
In Lee v. Lalu Canada Inc. (Ont CA, 2020) the Court of Appeal set out the legal standard for advance litigation funding offered by corporations to indemnify their directors and officers: II. LEGAL FRAMEWORK
[4] Lee’s application for advance funding was based on the provisions of Lalu’s Unanimous Shareholders’ Agreement (dated December 15, 2015 and amended and restated in June 2017) and s. 124 of the Canada Business Corporations Act, R.S.C. 1985, c. C-44 (the “CBCA”).
[5] The relevant provision of the Unanimous Shareholders’ Agreement reads as follows:To the fullest extent permitted by law, the Corporation will indemnify and save harmless each director and officer and former director or officer of the Corporation … against all costs, charges and expenses … reasonably incurred by the director or officer in respect of any civil, criminal, administrative, investigative proceeding to which the director or officer is made a party by reason of being or having been a director or officer of the Corporation[.] [6] Section 124 of the CBCA provides for the indemnification of individuals, including former directors and officers of a corporation, for their reasonable costs incurred in defending an action in which they are involved because of their association with the corporation. Advance funding of costs is available, without court approval under s. 124(2) or with court approval under s. 124(4), subject to the individual fulfilling the conditions of s. 124(3), one of which is that the individual “acted honestly and in good faith with a view to the best interests of the corporation”. Subsection 124(7) provides that an individual, entity or corporation can apply to the court for an order approving indemnity.
[7] The test on an application under s. 124 for advance funding is set out in this court’s decision in Cytrynbaum v. Look Communications Inc., 2013 ONCA 455, 116 O.R. (3d) 241, leave to appeal refused, [2013] S.C.C.A. No. 379, [2013] S.C.C.A. No. 377. Advance funding should be denied only where the court is persuaded, on a preliminary assessment of the merits, that the corporation has made out a strong prima facie case of bad faith on the part of the applicant for funding. In Cytrynbaum, Sharpe J.A. noted that the strong prima facie case test “is a stringent test that gives significant weight to the protection of officers and directors. It ensures that they will ordinarily receive advance funding but leaves open the possibility that advancement will be denied when there is strong evidence of bad faith”: at para. 56.
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