How do courts analyze an Alberta shareholder Oppression Case?
The case of Haack v Secure Energy (Drilling Services) Inc, 2021 ABQB 82 had a good discussion of what courts look for in Shareholder oppression cases. The Court said at 519:
 Sections 241 and 242(2) of the Business Corporations Act (Alberta) grant this Court jurisdiction to make “any order it thinks fit” where it has been shown that conduct by a corporation or its directors was oppressive or unfairly prejudicial to, or unfairly disregarded the interests of, its shareholders.  The Supreme Court of Canada directs the Court exercising that jurisdiction to consider, first, whether the directors or corporation have violated the reasonable expectations of a shareholder and, second, whether the conduct that did so was oppressive or unfairly prejudicial to, or unfairly disregarded the interests of, the shareholder: BCE Inc. v 1976 Debentureholders, 2008 SCC 69 at para 68; Wilson v Alharayeri, 2017 SCC 39 at para 24.  To establish his claim Mr. Haack must show “wrongful conduct, causation and compensable injury”: BCE Inc. v 1976 Debentureholders, 2008 SCC 69 at para 90. There must be a causal connection between the impugned conduct and the outcome suffered by the shareholder: Clarke v Rossburger, 2001 ABCA 225 at para 6.  The decision about whether oppression has occurred is fact-specific and discretionary; while the parties provided case law in support of their position, the cases “are only illustrations and this Court must do its own analysis to determine whether oppression, unfair prejudice or unfair disregarding has occurred”: McGovern-Burke v Martineau, 2016 ABQB 514 at para 56; Toor v 1176520 Alberta Ltd., 2019 ABCA 334 at para 28.  To identify the reasonable expectations of the shareholder, the Court should consider: “general commercial practice; the nature of the corporation; the relationship between the parties; past practice; steps the claimant could have taken to protect itself; representations and agreements; and the fair resolution of conflicting interests between corporate stakeholders:” BCE Inc. v 1976 Debentureholders, 2008 SCC 69 at para 72.  The inquiry is “objective and contextual” and depends on “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”. Having said that, a shareholder’s reasonable expectations always include both “fair treatment” and that a director will act in the best interests of the corporation: BCE Inc. v 1976 Debentureholders, 2008 SCC 69 at paras 62, 64, and 66.  Numerous cases have held that the obligations imposed by a shareholders’ agreement will be considered part of a shareholder’s reasonable expectations: BCE Inc. v 1976 Debentureholders, 2008 SCC 69 at para 79; McGovern-Burke v Martineau, 2016 ABQB 514 at para 66; Linamar Corporation v Wescast Industries Inc. 2004 CanLII 18045 (ONSC) at para 5-6; Main v Declan Group Inc., 1999 CanLII 14946 (ONSC) at paras 42and 50.  The second part of the test focuses on the nature of the conduct. Oppressive conduct is that which is coercive and abusive, and suggestive of bad faith. Unfair prejudice is less culpable conduct, but which has unfair consequences. Unfair disregard means that the actor ignored an interest, treating it as of no importance, contrary to the shareholder’s reasonable expectations: BCE Inc. v 1976 Debentureholders, 2008 SCC 69 at para 67; McGovern-Burke v Martineau, 2016 ABQB 514 at para 60.  The focus is on the conduct, not on the actor’s motives. A bad motive may “point to oppression, unfair prejudice or unfair disregarding”, but it is not the focus of the inquiry McGovern-Burke v Martineau, 2016 ABQB 514 at para 58; Munter v Gilchrist, 2020 ABQB 595 at para 32.  A bad faith breach of a unanimous shareholders agreement will generally be viewed as oppressive: Linamar v Wescast Industries Inc., 2004 CanLII 18045 (ONSC) at para 6; Main v Declan Group Inc., 1999 CanLII 14946 at para 50.  Further, while wrongful dismissal cannot in and of itself ground a claim for oppression, the circumstances in which a party has been terminated may be considered if it forms part of a pattern of oppression, such as “where there is a close connection between an employment contract and a shareholders’ agreement”: Mack v Universal Dental Laboratories Ltd., 2020 ABQB 738 at para 161; Dalmac Oilfield Services Inc (Re), 2020 ABQB 752 at para 35; Dubois v Milne, 2020 BCCA 216 at para 135.
The analysis the courts use for shareholder oppression is very context dependent. If you feel your shareholder interests have been oppressed, please feel free to contact us.
The information contained in this article is not legal advice. No solicitor client relationship is formed through this article. The reader is encouraged to retain counsel for advice in these matters.