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Corporations - Oppressions II

. Abbasbayli v. Fiera Foods Company

In Abbasbayli v. Fiera Foods Company (Ont CA, 2021) the Court of Appeal considered the application of the s.248 OBCA oppression provisions to an employee suing from wrongful dismissal and related employment claims (under the argument that he was a "creditor" to the corporation). A substantial theme was that the employee sought oppression remedies against not only the corporation, but against the director's personally:
(c) The Section 248 OBCA Claim

[36] The appellant is seeking relief under s. 248 of the OBCA against the individual respondents as part of his wrongful dismissal action. Section 248 provides a “complainant” with a remedy for “oppression” – conduct that is “oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer of the corporation”. “Complainant” is defined at s. 245 as (a) a registered holder or beneficial owner, and a former registered holder or beneficial owner, of a security of a corporation or any of its affiliates, (b) a director or an officer or a former director or officer of a corporation or of any of its affiliates, or (c) any other person who, in the discretion of the court, is a proper person to make a s. 248 application.

[37] The s. 248 OBCA claim is asserted at paras. 56-61 of the statement of claim under the heading “Director’s Liability”. As already noted, these paragraphs seek to hold the individual respondents liable for various kinds of damages, relying in part on the statutory claims. The appellant alleges at para. 56 that the individual respondents “used their directorial powers oppressively by directing Fiera to dismiss [him] for cause”, and at para. 57 he pleads that they “exercised the powers of directors in an oppressive manner, without legal or moral justification, and as such are jointly and severally liable for the aforementioned claims pursuant to sections 131 and, inter alia, 248 of the [OBCA].” At para. 59 he pleads that the individual respondents did not carry out their duties in good faith when they failed to instruct Fiera to remit the wages owing to him before the dismissal, made the decision on behalf of Fiera to dismiss him without notice or compensation, and did not issue him a record of employment. He pleads at para. 60 that he “remains a creditor and complainant of Fiera pursuant to the [OBCA]” and at para. 61 he pleads that the individual respondents are “liable for all compensation and damages sought against Fiera, jointly and severally”, that are claimed in his prayer for relief.

[38] The respondents sought to strike the appellant’s s. 248 claim under r. 21.01(1)(b). The motion judge, in supplementary reasons, struck the oppression claim with leave to amend, observing that the respondents had provided the appellant with a roadmap of what is required to fix the pleading. On the motion to strike, the respondents had submitted that the appellant did not have standing to make the claim, that he did not plead what the reasonable expectations were or what the conduct was of the defendant directors which disregarded his reasonably held expectations, and that he did not plead that the directors’ conduct affected his ability to recover judgment against the corporate defendants. It appears that the motion judge may have been referring to these arguments on the motion to strike as the “roadmap” guiding the appellant on how to fix his pleadings.

[39] The appellant argues that the motion judge erred in striking the s. 248 OBCA oppression claim, as he had pleaded the necessary material facts, and in failing to provide an explanation for striking the claim.

[40] The respondents argue that the motion judge correctly struck the s. 248 OBCA oppression claim as the appellant does not have standing to advance such a claim and has failed to plead that the conduct of the directors disregarded his reasonable expectations. The respondents however did not cross-appeal the motion judge’s refusal to strike the s. 248 claim without leave to amend.

[41] The motion judge did not err in striking the oppression claim under s. 248 of the OBCA with leave to amend.

[42] I begin by noting that wrongful dismissal by itself will not usually justify a finding of oppression; nor is a terminated employee always a “complainant” who has standing to bring an oppression proceeding under s. 248 of the OBCA. Typically, oppression claims that are asserted in the context of wrongful dismissal are made by shareholder employees whose interests have been unfairly disregarded: see e.g. Walls v. Lewis (2009), 2009 CanLII 31983 (ON SC), 97 O.R. (3d) 16 (S.C.). Claims have been asserted successfully by non-shareholder employees where a director’s conduct has prevented the corporate employer from paying wages or wrongful dismissal damages: see e.g. Churchill v. Aero Auction Sales, 2019 ONSC 4766, 147 O.R. (3d) 44 (the director, also the plaintiff’s former common law spouse, withheld wages, terminated her employment, caused the corporation to cease operations, and transferred its assets to a related corporation); Downtown Eatery (1993) Ltd. v. Ontario (2001), 2001 CanLII 8538 (ON CA), 200 D.L.R. (4th) 289 (Ont. C.A.), leave to appeal refused, [2001] S.C.C.A. No. 397 (directors caused the company to go out of business and transferred its assets to related companies they owned and operated a few months before a scheduled wrongful dismissal trial). Similarly, such a claim was permitted to proceed as part of a proposed class proceeding in Brigaitis v. IQT, Ltd. c.o.b. as IQT Solutions, 2014 ONSC 7, 22 B.L.R. (5th) 297, at paras. 90-99, where it was alleged that the directors had diverted funds for personal use before the corporation terminated the employment of employees, leaving insufficient funds to pay termination pay and other amounts.

[43] It is not sufficient for a terminated employee, as here, to plead that the individual defendants acted oppressively as directors of the corporate defendants, and to claim all of their damages against such individuals, relying on s. 248 of the OBCA. Nor is it sufficient to allege that the directors directed the appellant’s termination, or that they failed to ensure that he received a record of employment.

[44] The necessary elements of an oppression claim were recently articulated by the Supreme Court in Wilson v. Alharayeri, 2017 SCC 39, [2017] 1 S.C.R. 1037. First, the complainant must identify the reasonably held expectations they claim to have been violated by the conduct at issue. Second, the complainant must show that these reasonable expectations were violated by corporate conduct that was oppressive or unfairly prejudicial to or that unfairly disregarded the interests of any security holder, creditor, director or officer of the corporation: at para. 24. The Supreme Court in Wilson also observed that to impose personal liability, there must be oppressive conduct that is properly attributable to the director’s implication in the oppression and the imposition of personal liability must be fit in all the circumstances: at paras. 47-48.

[45] The appellant did not address these elements in his pleading. He did not plead his reasonable expectations of the directors or that those reasonable expectations were violated by oppressive corporate conduct. The appellant’s reasonable expectations cannot simply be inferred from his pleadings of what the directors did or failed to do. As such, there were insufficient material facts in the statement of claim to establish a claim for oppression under s. 248 of the OBCA.

[46] I would therefore uphold the motion judge’s order striking the s. 248 claim with leave to amend. Before leaving this ground of appeal however I would observe that nothing in these reasons is intended to determine whether a claim for an oppression remedy is appropriate in the circumstances of this case, whether the appellant would have standing as a “complainant” (which is in the discretion of the court), or even whether, having been granted leave to amend his pleadings, the appellant will be able to plead the facts that are necessary to seek an oppression remedy against the individual respondents under s. 248.
. Baylin Technologies Inc. v. Gelerman

In Baylin Technologies Inc. v. Gelerman (Ont CA, 2021) the Court of Appeal considered a corporate oppression remedy:
(3) Oppression

[47] The application judge moved from his conclusions regarding the Baylin majority voting policy to the issue of oppression. He concluded that both Gelerman and Spacebridge had a reasonable expectation that Gelerman would be a director for the two-year period of the earn-out. He then concluded that Baylin’s actions in adopting the majority voting policy were “misleading and false” and that the policy was drafted for the purpose of removing Gelerman as a director.

[48] The application judge’s finding regarding the reasonable expectations of Gelerman and Spacebridge are findings of fact that are entitled to deference from this court. They may only be interfered with if a palpable and overriding error is demonstrated.

[49] In my view, Baylin has demonstrated such an error. I begin with the fact that reasonable expectations are to be viewed on an objective, not subjective, basis. As the Supreme Court of Canada said in BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, [2008] 3 S.C.R. 560, at para. 62:
As denoted by "reasonable", the concept of reasonable expectations is objective and contextual. The actual expectation of a particular stakeholder is not conclusive. In the context of whether it would be "just and equitable" to grant a remedy, the question is whether the expectation is reasonable having regard to the facts of the specific case, the relationships at issue, and the entire context, including the fact that there may be conflicting claims and expectations.
....

[51] .... As a general proposition, it will be difficult for a party to advance that it had a reasonable expectation regarding a particular result that is above and beyond that for which the party negotiated: Casurina Limited Partnership v. Rio Algom Ltd. (2004), 2004 CanLII 30309 (ON CA), 181 O.A.C. 19, at para. 26.


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