The Oppression Remedy: Clarifying Part II of the BCE Test
96 Canadian Bar Review 484
53 Pages Posted: 7 Jul 2018 Last revised: 13 Mar 2019
Date Written: June 19, 2018
Claiming oppression is easy. Only the low bar of unfairness must be overcome. It seems to arise from any unwelcome conduct in a (usually) closely-held corporation. It can be appended to any corporate misconduct claim. Broad statutory language governs the remedy, making it facially applicable to a broad range of conduct. In addition, the remedy is fact-based, being granted when a party satisfies the court that the corporation or its directors acted in a way that is oppressive or unfairly prejudicial to, or that unfairly disregards the interests of, any security holder, creditor, director, or officer. In the face of these challenges, courts have struggled to maintain a clear set of applicable rules to govern when oppression has occurred. And, as a consequence, predicting the outcome of an oppression case is difficult.
This paper prescribes how courts can achieve greater clarity in cases where a party has alleged oppression. By clarifying and categorizing the harm that must be suffered by a complainant to successfully allege oppression, this area of law can become more structured, more transparent and less ambiguous. Courts have expounded on the rules and limitations applicable to assess the harm suffered by a complainant, and several implicit rules and limitations can be identified in the cases, but there is more of a “grab-bag” of rules than overarching principles. Courts have not identified an overarching principle to permit judges or affected parties to determine the harm necessary to demonstrate oppression. This paper identifies patterns in the case law and categorizes them to show how courts can achieve clarity in their oppression remedy jurisprudence.
Part one of this paper examines the BCE decision and the inherent gap left by part two of the BCE test. This part of the paper will review cases post-BCE to show how courts have not sufficiently clarified what harm means. This part will also discuss the reasons this problem exists. In addition to the breadth of the statutory language, cases that obtain a remedy for oppression have facts that fairly evidently demonstrate unfairness or wrongful behaviour that necessitates a remedy, allowing decisions to get by without much explanation as to how the outcomes are achieved.
Part two of this paper develops a principled approach to determine whether the impugned conduct rises to the level of harm required by the statute. This approach has two parts. The first part identifies the elements necessary to entitle the applicant to an oppression remedy and combines them to form two overarching principles. In this part, I examine the last three years of oppression remedy cases in Alberta, British Columbia and Ontario and categorize the features and patterns emerging from these decisions. I combine them to articulate two overarching principles to apply to every oppression remedy case to clarify what constitutes relevant harm suffered by the complainants, principles extrapolated from the cases and expressly acknowledged by the courts. First, the complainant must experience harm arising from its relationship with the corporation, and the harm must be particular to the complainant’s interests. Second, other remedies cannot be capable of addressing this harm. These two principles determine whether a complainant is eligible to be considered under the second step of the BCE test.
The second part of the approach comprises of discussing the effect of the impugned conduct on a complainant, to show how prejudicial conduct or conduct that disregards the complainant can become conduct that is “unfairly prejudicial” or that “unfairly disregards” the complainant. The legislation does not define the statutory components and the Supreme Court maintained that they cannot be “conclusively defined”, which is correct, as they are simply descriptors of inappropriate conduct. Absent a definition, however, guidelines on how to meet these tests are necessary. Although conduct will meet the statutory tests on a case-by-case basis, depending on the facts and the context, rather than by ascribing legal meaning to the statutory tests, one can nonetheless articulate principles to guide courts in their analysis. Specifically, identifying what effect of the conduct on the complainant is necessary to satisfy the test will clarify the courts’ analysis of why certain behaviour meets the statutory tests, and other behaviour does not. In this part of the paper, I examine cases that clearly articulate the effect of the harm on the complainant.
Keywords: Director Liability, Oppression, BCE
Suggested Citation: Suggested Citation