Schrager, Gagné, Moore

Appeals from judgments of the Superior Court dismissing an oppression remedy and ruling with respect to a declaration of abuse. Allowed in part.

The respondent Cardinal founded the respondent corporation, registering himself and the appellant, his spouse, as directors and shareholders. After the couple separated, the appellant began to take an interest in the business of the company, but her actions led to the revocation of her mandate as director. In this context, she instituted her application whereby she initially sought to have her shares repurchased. The appellant then amended her application to seek the dissolution and liquidation of the company.

The trial judge found that the appellant felt wronged in her expectations arising from her position in the business on several grounds, but that she did not prove the reasonableness of her expectations. He found that the only appropriate remedy to stop all her undue interference and oppression was her definitive departure and the repurchase of her shares. Last, the judge declared the appellant’s re-amended application and her procedural conduct abusive. In a second judgment, he condemned her to pay $25,000 in damages and $2,500 in punitive damages.

A court seized of an oppression remedy has the power to make an order that has not been requested by the applicant, but only if the parties have been given an opportunity to make representations on the remedy proposed by the court (s.  452 of the Business Corporations Act (CQLR, c. S-31.1)). In this case, the judge was seized of an application for dissolution and liquidation; therefore, section 461 et seq. apply. Pursuant to s. 464 of the Act, the judge had jurisdiction to make any order he thought fit, including, the repurchase of the appellant's shares.

The liquidation of the company, which was active and profitable, was not a justifiable or appropriate solution.  The appellant did not have a reasonable expectation that she would continue to act as director, because she had never participated in the company’s activities. That said, the judge should have informed her of his intention to order the repurchase of her shares and that there was a deficiency in the evidence in this regard given that their value had not been established. By failing to invite the appellant to address this deficiency, the judge erred in law, which led him to commit another error in determining the value of the shares held by the appellant in the company. It is necessary to refer the file back to first instance so that proof of the fair market value of the shares may be made.

It is also necessary to intervene with regard to the declaration of abuse. Indeed, the absence of a settlement is not, on its own, abusive. The appellant’s bad faith and unreasonable use of procedure, however, are supported by the evidence. Regarding the conclusion that the appellant needlessly subjected the respondents and the impleaded party to a three-day trial, it must be emphasized that the company recognized the appellant’s status as a shareholder only the day before trial and that it was only at trial that it took the position that her shares were worth only $1. This shows that the trial was necessary. In addition, the duration of the trial was already set by the parties when the case was readied for trial. The amount awarded as damages will therefore be reduced by half, but the condemnation to pay punitive damages will be maintained.

Text of the decision: http://citoyens.soquij.qc.ca