CanLII - 2003 CanLII 35795 (ON S.C.) - The Diigo Meta page

• 05 Nov 09
  

  David Scrimshaw

  The complaint relates to the fact that, regardless of the amount of profit, CIC sold assets otherwise available to satisfy the applicant’s claim to a related company who in turn resold those assets at a profit, was paid, and yet has not yet paid CIC for the supply of such assets in circumstances where payment would provide CIC with the financial ability to honour the debt it has been found to owe to the applicant

  Law corporate oppression Creditor

  •  “Oppressive” has been
    interpreted as meaning burdensome, harsh or wrongful:  Scottish
    Cooperative Wholesale Society Ltd. v. Meyer, [1959] A.C. 324; Burnett v. Tsang reflex, (1985), 29 B.L.R. 196.
  • “Unfairly prejudicial” has been held to mean “acts that are unjustly or
    inequitably detrimental”:  Diligenti v. R.W.M.D. Operations Kelowna
    (1996), 1 B.C.L.R. 36.
  • 10 more annotations...
  • •  “Unfairly disregards” has
      been held to mean “unjustly or without cause, pay no attention to, ignore or
      treat as of no importance the interests of security holders, creditors,
      directors or officers”:  Stech v. Davies reflex, (1987), 53 Alta. L.R. (2d) 373
    •  It appears that the
      progression from “oppressive” to “unfairly prejudicial” to “unfairly disregards”
      involves decreasingly stringent requirements
    • An applicant need not show mala fides on the part of the respondents, as it is
      the effect of their actions, rather than their intent, which is material
    •  Amongst the factors to be
      considered is included the reasonable expectation of a creditor that debtors
      will not engage in conduct after becoming a creditor, and during and after a
      trial, that will hinder satisfaction of a judgment: 
    • Also included in the factors to be considered are the history and nature of the
      corporation, the nature of the relationship between the parties, general
      commercial practice, and detriment to the creditor’s interests where those who
      control a closely held corporation transfer assets and pay shareholder loans
      with the result that the creditor remains unpaid with no likelihood of
      recovery: 
    • Paying dividends or redeeming shares when a corporation is unable to pay its
      liabilities has been held to constitute unfairly prejudicial conduct, and to be
      unfairly disregarding of a creditor’s interests: 
    •  It has been held to
      amount to oppression where the owner in control of a corporation directs its
      affairs so as to divert the corporation’s money to himself and thereby render
      the corporation unable to pay a judgment debt: 
    • Section 241(2) is offended where the director of a corporation takes money out
      of it after service of a statement of claim as the director is then putting his
      interests ahead of those of the creditors and the corporation, and he has been
      held to “unfairly disregard” the creditor’s interest:  Heap Noseworthy
      Ltd. v. Didham 1996 CanLII 6621 (NL S.C.T.D.), (1996) 38
      C.B.R. (3d) 94; SCI Systems Inc. v. Gornitzki Thompson & Little Co.
      1998 CanLII 17741 (ON S.C.D.C.), (1998), 110
      O.A.C. 160.
    • s. 241 of the CBCA, which in effect legislates that in certain circumstances the
      principals behind a company can be held accountable in circumstances where they
      have directed the corporation’s affairs in such a way as to benefit themselves
      to the detriment of creditors
    • The respondents are not entitled, after the fact, to call upon the applicant to
      share in the risk by denying the applicant repayment of monies it has been
      judicially found to be owed as the result of corporate dealings which stripped
      the debtor company of the ability to pay such monies, by virtue of maneuvers
      designed to remove the assets otherwise available for that purpose to a place of
      benefit to the controlling forces of the corporation in question

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