The oppression remedy is a powerful and broad remedy available under section 248 of the Business Corporations Act, RSO 1990, c B.16 (the “OBCA”). It allows a complainant to apply to the court for relief where a corporation’s conduct is oppressive, unfairly prejudicial, or unfairly disregards the interests of any security holder, creditor, director or officer of the corporation. The court is then granted broad discretion under the OBCA to make any interim or final order it thinks fit.
To be entitled to a remedy under section 248 of the OBCA, the complainant must show (1) a reasonable expectation that the corporation would treat it in a certain way, and (2) that reasonable expectation was violated by oppressive conduct, unfairly prejudicial conduct, or conduct that unfairly disregarded their interests.[1]
Although primarily a corporate law remedy, the oppression remedy may be used in limited circumstances for breach of trust actions under the Construction Act, RSO 1990, c C.30 (the “Construction Act”). In particular, the oppression remedy may be a complementary pleading in a Construction Act breach of trust action, and in fact, it is not uncommon for lawyers to plead the OBCA in their breach of trust claims.
The Construction Act breach of trust provisions create a cause of action which is distinct from the lien remedy. At a high level, the function of the statutory trusts created by the Construction Act keeps funds within the construction pyramid and dissuades parties from evading their payment obligations down the construction pyramid. Importantly, the Construction Act breach of trust remedy permits personal judgments against the officers and directors of the breaching corporation.
The point of intersection between the oppression remedy and the breach of trust provisions may reasonably be said to be as follows: the statutory trust imposed by the Construction Act creates a reasonable expectation that the payor will not misappropriate trust funds. If trust funds are misappropriated, then the interests of the payee may be unfairly disregarded, or the payee may be oppressed or unfairly prejudiced.
This intersection is supported by Vicor Mechanical Ltd v Pegah Construction Ltd, 2009 CanLII 68467 (SCJ) (“Vicor Mechanical”). In that case, on a motion to strike paragraphs from the plaintiff’s statement of claim, the Court determined that the plaintiff’s primary claim related to an alleged breach of trust under the former Construction Lien Act. The Court did not prevent the plaintiff from asserting the oppression remedy because “it is possible that a breach of the [Construction Lien Act] is the act that effects a result that is oppressive or unfairly prejudicial to or unfairly disregards the interests of the plaintiff”.
When deciding whether to plead relief under the OBCA, it is important to consider the remedy sought. The primary advantage of pleading the oppression remedy in conjunction with a Construction Act breach of trust claim is that the remedies available under the OBCA are much more flexible than those available under the Construction Act, as the court is granted the ability to make any interim or final order it thinks fit.
With that in mind, if a plaintiff is simply seeking damages for breach of trust, a claim for the oppression remedy may simply be an “in the alternative” argument. In this case, there is no particular advantage to pleading the oppression remedy because, on the authority of Vicor Mechanical, the basis for granting the oppression remedy is a successful breach of trust claim.
There does not appear to be any case law where the courts have actually granted relief under the OBCA when both breach of trust under the Construction Act and the oppression remedy are pleaded. In fact, the oppression remedy may be more difficult to prove than the breach of trust claim because it requires the additional element of oppressive or prejudicial conduct.[2]
An additional hurdle to relief under the OBCA may be the requirement for a plaintiff to prove that they are a “complainant” under section 245 of the OBCA. Although creditors are generally accepted to be a “proper person” for the purposes of the statutory definition, they are not complainants as of right and the case law is clear that not all debt actions should be converted to oppression claims. In Royal Trust Corp of Canada v Hordo, [1993] OJ No 1560 (Gen Div), the Court stated that complainant status should be refused “where the creditor is not in a position analogous to that of the minority shareholder and has ‘… no particular legitimate interest in the manner in which the affairs of the company are managed’”.
However, there may be circumstances where it would be appropriate to ask the court for an alternative remedy, which may only be available under the OBCA because the circumstances require a remedy relating to the management of the trust-breaching corporation’s affairs. For example, under the OBCA, the court may make an order varying or setting aside a transaction or contract to which a corporation is a party, and compensating the corporation or “any other party” to the transaction or contract. Therefore, if setting aside the contract between the parties is an appropriate remedy, a claim under the OBCA may be favourable to the Construction Act breach of trust claim.
From a practical standpoint, the oppression remedy and breach of trust claims can be pleaded together with a view to maximizing the relief available to the plaintiff. However, in light of the absence of case law granting relief for oppression in a breach of trust scenario, counsel should assess whether the oppression remedy is appropriate in the circumstances before proceeding with a claim for relief under the OBCA. A corporate remedy alternative to damages will likely be appropriate only in rare circumstances—namely, where the plaintiff's interest in the trust-breaching corporation is akin to that of a minority shareholder.