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Annotated

13 Nov 09

Desjardins Ducharme Stein Monast v. Empress Jewellery (Canada) Inc., 2004 CanLII 15737 (QC C.S.)

the interests of a major unsecured creditor are considered to be unfairly prejudiced in a case where there is a closely-held corporation in which the directors and shareholders gain a personal advantage or a reduction in liability by keeping funds or assets out of such creditor's reach

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Law oppression corporate creditor

05 Nov 09

Chisum Log Homes & Lumber Ltd. v. Investment Saskatchewan Inc., 2007 SKQB 368 (CanLII)

Section 219 of The Business Corporations Act does not establish a limitation period. Rather it permits actions to be brought against dissolved companies without the necessity of reviving those companies.

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Law corporate director creditor

Danylchuk et al. v. Wolinsky et al. and Feierstein and Fishman Medical Corporation v. Wolinsky et al., 2007 MBQB 65 (CanLII)

since the directors have been sued in their personal capacity it is irrelevant whether or not the corporation was in existence at the time of the application

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Law corporate Director oppression Creditor

Desjardins Ducharme Stein Monast v. Empress Jewellery (Canada) Inc., 2004 CanLII 15737 (QC C.S.)

[37] In the Court's opinion, the interests of a major unsecured creditor are considered to be unfairly prejudiced in a case where there is a closely-held corporation in which the directors and shareholders gain a personal advantage or a reduction in liability by keeping funds or assets out of such creditor's reach. The Court is satisfied that the repayment of the shareholder loans, the payment of dividends, the payment of bonuses as well as the disposal of most of Empress' inventory and equipment were not reasonable and legitimate business decisions on behalf of Empress, but rather a form of self-dealing by Mr. and Mrs. Dubrovsky and Mr. Azran.

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Law oppression corporate Creditor

While lack of good faith can constitute oppressive or unfairly prejudicial
conduct, it is not a necessary prerequisite for a remedy under section
241 CBCA or its provincial equivalents

Yukon and Canada v. B.Y.G. Natural Resources Inc., 2007 YKSC 2 (CanLII)

Canada granted leave to pursue oppression action for environmental cleanup costs

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Law corporate oppression Creditor

Apotex Inc. v. Laboratoires Fournier S.A., 2006 CanLII 38354 (ON S.C.)

If the oppressive conduct alone was enough to create the status of a creditor-complainant for the purposes of the oppression remedy, then the oppression remedy could be used by any plaintiff in any case where a corporation has caused damage through an otherwise conventional breach of contract or through tortious conduct.

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Law Creditor corporate oppression

The law is clear that the
creditor-complainant has to be a creditor at the time of the alleged oppression:
It is not
enough that the complainant became a creditor as a result of the allegedly
oppressive conduct, as was the case here. If this were the law, then it
would be “unsatisfactorily circular.”

Piller Sausages & Delicatessens Ltd. v. Cobb International Corp., 2003 CanLII 35795 (ON S.C.)

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

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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

Levy-Russell Ltd. v. Shieldings Inc., 1998 CanLII 14685 (ON S.C.)

[37] The creditor respondents have clearly met the criteria of (1) having a legitimate interest in the affairs of the corporation and (2) being analogous to that of a minority shareholder. They also may have met the criterion of having a reasonable expectation that the company’s affairs would be conducted with a view to protecting their interests as judgment creditors.

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Law oppression corporate Creditor

[18]
The courts, have, in some cases, found that a
creditor has standing to assert an oppression action. In all such cases the
courts invoked their discretionary powers pursuant to s. 245(c) of
the O.B.C.A. which defines a “complainant” as (other than security holders past
or present and directors and officers past and present) any other person who, in
the discretion of the court, is a proper person to make an application under
this part:
[19]
However, it has been held that debt actions should
not be routinely turned into oppression actions: see Royal Trust Corp. of
Canada v. Hordo reflex, (1993), 10
B.L.R. (2d) 86 (Ont. Gen. Div.).
2 more annotations...
- While it is true that most of the alleged oppression acts took place before the
  respondents became judgment creditors, that does not necessarily mean that their
  interest as creditors is “remote” as that term is used by Blair J. in Jacobs
  Farms Ltd. v. Jacobs, [1992] O.J. No. 813 (Gen. Div.).
- The Ontario Court of Appeal in G.T. Campbell & Associates Ltd. v. Hugh
  Carson Co. (1979),
  24 O.R. (2d) 758, 7 B.L.R. 84, has held that a person with a claim for
  unliquidated damages should be considered a creditor of a corporation for the
  purposes of the O.B.C.A. where that expanded definition is necessary to ensure
  that an unreasonable or unjust result does not occur.

04 Nov 09

Peoples Department Stores Inc. (Trustee of) v. Wise, 2004 SCC 68, [2004] 3 S.C.R. 461

directors owe a duty of care to creditors, but that duty does not rise to a fiduciary duty

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Law corporate oppression Creditor Fiduciary Director

Section 241 of
the CBCA provides a possible mechanism for creditors to protect their interests
from the prejudicial conduct of directors. In our view, the availability
of such a broad oppression remedy undermines any perceived need to extend the
fiduciary duty imposed on directors by s. 122(1)(a) of the CBCA to
include creditors