PricewaterhouseCoopers Inc. in its capacity as Trustee of Olympia & York Developments Limited, a bankrupt v. Olympia & York Realty Corp. et al. [Indexed as: Olympia & York Developments Ltd. (Trustee of) v. Olympia & York Realty Corp.]
68 O.R. (3d) 544
[2003] O.J. No. 5242
Docket No. C36941
Court of Appeal for Ontario
Goudge, Simmons and Gillese JJ.A.
December 24, 2003
Bankruptcy and insolvency -- Reviewable transactions -- Remedies -- Corporation purchasing additional shares in wholly owned subsidiary and consideration ultimately used to discharge debt-owned corporation -- No money actually changing hands -- Trustee in bankruptcy alleging that consideration for transaction conspicuously less than fair market value of assets transferred -- Trial judge making no error in concluding that transaction reviewable -- Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, s. 100.
Corporations -- Oppression remedy -- Complainant -- Trustee in bankruptcy -- Corporation purchasing additional shares in wholly owned subsidiary and consideration ultimately used to discharge debt-owned corporation -- No money actually changing hands -- Trustee in bankruptcy alleging that transaction oppressive -- Trustee in bankruptcy may be proper person to be complainant -- Business Corporations Act, R.S.O. 1990, c. B.16, s. 248
In 1992, Olympia & York Developments Ltd. ("OYDL") owned all the shares of Olympia & York Realty Corp. ("OYRC"), which, in turn, owned all the shares of Olympia & York SF Holdings Corp. ("OYSF"). OYDL was owed $391 million by OYSF and held the security of a promissory note. On March 16, 1992, OYDL acquired additional OYRC shares for a stated consideration of $397.8 million and OYRC acquired additional OYSF shares for the same consideration. OYSF directed that $390.8 million be repaid for the promissory note and that $7 million be lent to OYDL as evidence by a promissory note. No money actually changed hands. The end result was that OYDL acquired additional shares in OYRC and surrendered the OYSF note. [page545]
In May 1992, petitions for a receiving order under the Bankruptcy and Insolvency Act ("BIA") were issued against OYDL. Its trustee in bankruptcy sued OYRC and OYSF. After a trial, Farley J. concluded that pursuant to s. 100 of the BIA, the March 1992 transaction was a reviewable transaction in which there was a conspicuous difference between the fair market value of what OYDL received and what it gave up. He also found that pursuant to s. 248 of the Ontario Business Corporations Act, ("OBCA"), the transaction constituted oppression of the creditors of OYDL. He determined that the appropriate remedy was to give the trustee in bankruptcy of OYDL the appellants' remaining assets to make up for the loss. OYRC and OYSF appealed.
Held, the appeal should be dismissed.
As a matter of appellate review, in so far as Farley J.'s findings under s. 100 of the BIA or under s. 248 of the OBCA were findings of fact, they were entitled to significant deference. The appellants' challenges to Farley J.'s analysis of s. 100 of the BIA failed. First, the use of subsidiary corporations as intermediaries did not negate that the transaction was reviewable. Second, there was no error in the finding that the OYSF note, which OYDL gave up in the transaction, had a fair market value of $30 to $50 million. Third, although one of his reasons for holding that the additional OYRC shares received by OYDL had no value was erroneous, the other reason was sound, and there was no palpable and overriding error. Finally, there was no error in the exercise of the discretion conferred by s. 100(2) of the BIA.
Turning to s. 248 of the OBCA, the appellants challenged the finding that the trustee in bankruptcy was a proper complainant and the finding that the transaction was oppressive. Both challenges failed. As a matter of appellate review, both of the findings were exercises of discretion and were entitled to deference. Unless the trial judge erred in principle or made a significant error in determining and weighing the considerations relevant to these findings, they are beyond the scope of appellate review.
It was not the case that a trustee in bankruptcy can never be a complainant in an application for an oppression remedy. Section 245(c) of the OBCA confers on the court an unfettered discretion to determine whether an applicant is a proper person to commence oppression proceedings. Where the bankrupt is a party to the allegedly oppressive transaction, the trustee is neither automatically barred from being a complainant nor automatically entitled to that status. It is for the judge at first instance to determine in the exercise of his or her discretion whether, in the circumstances of the particular case, the trustee is a proper person to be a complainant. It was reasonable in the circumstances for Farley J. to find that this was a proper case in which to conclude that the trustee of OYDL was a proper person to be a complainant, in effect, on behalf of the creditors of OYDL. This conclusion was consistent with the bankruptcy principle of collective action to pursue the claims of the creditors of the bankrupt and the trustee's role as their representative. There was no error in the conclusion that the transaction was oppressive. Farley J. properly exercised his discretion and the appellate court should not interfere.
APPEAL from a judgment holding that a transaction was a reviewable transaction under s. 100 of the Bankruptcy and Insolvency Act.
Canada (Attorney-General) v. Standard Trust Co. (1991), 1991 7176 (ON SC), 5 O.R. (3d) 660, 84 D.L.R. (4th) 737, 4 B.L.R. (2d) 180, 9 C.B.R. (3d) 71 (Gen. Div.), not folld Other cases referred to Housen v. Nikolaisen, [2002] 2 S.C.R. 235, 2002 SCC 33, 219 Sask. R. 1, 211 D.L.R. (4th) 577, 286 N.R. 1, 272 W.A.C. 1, [2002] 7 W.W.R. 1, 30 M.P.L.R. (3d) 1, 10 C.C.L.T. (3d) 157; [page546] Husky Oil Operations Ltd. v. Canada (Minister of National Revenue), 1995 69 (SCC), [1995] 3 S.C.R. 453, 137 Sask. R. 81, 128 D.L.R. (4th) 1, 188 N.R. 1, 107 W.A.C. 81, [1995] 10 W.W.R. 161, 35 C.B.R. (3d) 1; Standard Trustco Ltd. (Trustee of) v. Standard Trust Co. (1995), 1995 3508 (ON CA), 26 O.R. (3d) 1, 129 D.L.R. (4th) 18, 36 C.B.R. (3d) 1 (C.A.) Statutes referred to Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, s. 100 Business Corporations Act, R.S.O. 1990, c. B.16, ss. 20, 245, 248 Authorities referred to Sopinka, J., S.N. Lederman and A.W. Bryant, The Law of Evidence in Canada, 2nd ed. (Toronto: Butterworths, 1999)
Peter F.C. Howard and Ashley John Taylor, for appellants. F.J.C. Newbould, Q.C., Aaron A. Blumenfeld and Benjamin T. Glustein, for respondent.
The judgment of the court was delivered by
[1] GOUDGE J.A.: -- This is an appeal from the judgment of Farley J. by the appellants, Olympia & York Realty Corp. ("OYRC") and its wholly owned subsidiary Olympia & York SF Holdings Corp. ("OYSF"). The respondent, who succeeded at trial, is Price WaterhouseCoopers Inc. as the trustee in bankruptcy of Olympia & York Developments Ltd. ("OYDL").
[2] The judgment concluded a trial which scrutinized a transaction done on March 16, 1992, between OYDL and the appellants. The trial judge concluded that, pursuant to s. 100 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 ("BIA"), this was a reviewable transaction in which there was a conspicuous difference between the fair market value of what OYDL received and what it gave up. The trial judge also found that pursuant to s. 248 of the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 ("OBCA"), the transaction constituted oppression of the creditors of OYDL. He determined that the appropriate remedy was the same for each claim, namely, to give the trustee in bankruptcy of OYDL the appellants' remaining assets to make up for the loss.
[3] The appellants argue that the trial judge erred in a number of respects in applying both s. 100 of the BIA and s. 248 of the OBCA. For the reasons that follow, I conclude that he did not err, except in one minor respect which does not affect the outcome. I would therefore dismiss the appeal. [page547]
The Facts
[4] In 1992, OYDL owned 100 per cent of the shares of OYRC which, in turn, owned 100 per cent of the shares of OYSF. OYRC held a significant number of U.S. real estate investments and, through OYSF, shares in certain U.S. public companies.
[5] At the date of the transaction in question in this litigation, March 16, 1992, OYSF owed OYDL approximately $391 million, secured by a promissory note that it had given to OYDL (the "OYSF note").
[6] In addition, OYSF had pledged a large proportion of its shareholdings to guarantee various financial obligations of OYDL and its other subsidiaries. Of these, a significant number of its marketable securities were pledged to guarantee a major loan made by the European Investment Bank ("EIB") under an agreement that constituted these securities a security interest in favour of EIB only on the occurrence of a "triggering event". If no triggering event occurred, these securities were free of any EIB charge and would be available to OYDL to recover under the OYSF note.
[7] As of March 16, 1992, Hong Kong Bank Canada ("HKBC") had extended a US$25 million credit facility to OYDL secured in part by a guarantee from OYSF. Pursuant to s. 20 of the OBCA, HKBC asked for a certificate by OYSF that it was solvent as defined in that section of the Act. However, no solvency certificate was required by s. 20(2)(c) of the OBCA, since OYSF was indirectly a wholly owned subsidiary of OYDL. HKBC had requested the solvency certificate as part of its standard checklist. When this had happened in the past, HKBC had typically been advised by a borrower or counsel if an exemption applied. Neither OYDL nor its counsel had raised the issue of the exemption with HKBC.
[8] The impugned transaction of March 16, 1992, involved several steps. OYDL acquired additional OYRC shares from OYRC for a stated consideration of $397.8 million. OYRC acquired additional OYSF shares from OYSF for a stated consideration in the same amount. OYSF directed that $390.8 million be repaid to OYDL for the OYSF note and that $7 million be advanced to OYDL to be evidenced by a note from OYDL to OYSF. No money actually changed hands. The end result for OYDL was that it acquired additional shares in OYRC and surrendered the OYSF note.
[9] On May 22, 1992, petitions for a receiving order under the BIA were issued against OYDL and a number of its subsidiaries including OYRC and OYSF. After the bankruptcy petition with respect to OYDL was heard on December 20, 1994, a receiving order was issued and the respondent was appointed [page548] trustee in bankruptcy of OYDL. OYRC and OYSF have not been adjudged bankrupt.
[10] After OYDL was adjudged bankrupt, all of OYSF's marketable securities were sold and secured creditors were paid the proceeds from the securities which had been pledged. Thereafter, there was approximately US$30 million left over, representing the remaining proceeds of realization on OYSF's assets. These funds have been held in trust to await the outcome of this litigation.
[11] In this action, the respondent trustee in bankruptcy for OYDL claimed that under s. 100 of the BIA, the fair market value of the OYSF note was conspicuously greater than the fair market value of the additional OYRC shares which OYDL received in the transaction. It also claimed under s. 248 of the OBCA that the transaction unfairly disregarded the interests of the creditors of OYDL and thus constituted an act of oppression.
[12] The trial judge held that the fair market value of the OYSF note was between US$30 and $50 million. He further held that the fair market value of the additional OYRC shares was nil and that there was therefore a conspicuous difference of US$30 to $50 million for purposes of s. 100 of the BIA. He found that the appellants had not satisfied him that he should exercise his residual discretion under s. 100(2) of the BIA to refuse judgment for that conspicuous difference.
[13] Turning to s. 248 of the OBCA the trial judge held that, in the circumstances, the respondent was a proper complainant and that the transaction constituted an oppression of the creditors of OYDL.
[14] By way of remedy, the trial judge ordered that the respondent was entitled to the funds held in trust on either basis: pursuant to s. 100 of the BIA or pursuant to s. 248 of the OBCA. He reasoned that even the low end of the range of conspicuous difference which he had found, when coupled with prejudgment interest and then converted to U.S. dollars, was equivalent to the value of the funds held in trust to the credit of this action. Hence, this sum was required to compensate the respondent for its loss due to the transaction. Before us, the appellants take no issue with this remedy if the trial judge is found to have properly applied these two sections.
Analysis
[15] The appellants raise challenges to a number of the trial judge's conclusions in both his analysis under s. 100 of the BIA and his analysis under s. 248 of the OBCA. So far as these [page549] challenges are to findings of fact, the trial judge's conclusions are entitled to significant deference in this court. We can interfere only if the trial judge has made a palpable and overriding error. In Housen v. Nikolaisen, [2002] 2 S.C.R. 235, 2002 SCC 33, Iacobucci and Major JJ. said this, at para. 1:
A proposition that should be unnecessary to state is that a court of appeal should not interfere with a trial judge's reasons unless there is a palpable and overriding error. The same proposition is sometimes stated as prohibiting an appellate court from reviewing a trial judge's decision if there was some evidence upon which he or she could have relied to reach that conclusion.
[16] With this in mind, I will first address the appellants' arguments in relation to s. 100 of the BIA and then those in relation to s. 248 of the OBCA.
The Section 100 Issue
[17] Section 100(1) and (2) of the BIA read as follows:
100(1) Where a bankrupt sold, purchased, leased, hired, supplied or received property or services in a reviewable transaction within the period beginning on the day that is one year before the date of the initial bankruptcy event and ending on the date of the bankruptcy, both dates included, the court may, on the application of the trustee, inquire into whether the bankrupt gave or received, as the case may be, fair market value in consideration for the property or services concerned in the transaction.
(2) Where the court in proceedings under this section finds that the consideration given or received by the bankrupt in the reviewable transaction was conspicuously greater or less than the fair market value of the property or services concerned in the transaction, the court may give judgment to the trustee against the other party to the transaction, against any other person being privy to the transaction with the bankrupt or against all those persons for the difference between the actual consideration given or received by the bankrupt and the fair market value, as determined by the court, of the property or services concerned in the transaction.
[18] In making an inquiry under this section, the court must find that there is a reviewable transaction and that it was made within the required time frame. Then the court must determine the fair market value of what the bankrupt gave up and the fair market value of what it received in the transaction. If the former is conspicuously greater than the latter, the section confers a discretion on the court to give judgment against the party to that transaction for the amount of the difference.
[19] While the appellants accept that the time frame requirement is met here, and do not contest the amount of the judgment, they challenge every other step in the trial judge's analysis under s. 100 of the BIA. [page550]
[20] First, although their oral argument was muted on this point, the appellants contend that there was no "reviewable transaction" here but rather a series of separate transactions involving different parties.
[21] This argument can be disposed of quickly. Pursuant to s. 100(1), the court may inquire into whether the bankrupt gave or received fair market value in consideration for the property involved in the transaction. Here, the consideration given by OYDL was the OYSF note and the consideration received was the additional shares in OYRC. That is the transaction in issue regardless of the steps taken to achieve this exchange of debt for equity. The purpose of s. 100 cannot be averted simply by using a subsidiary corporation to act as an intermediary. This was a reviewable transaction.
[22] Second, the appellants attack the trial judge's finding that the OYSF note which OYDL gave up in the transaction had a fair market value of $30 to $50 million. He held that the note would be worth that much to a vulture fund assessing the possible reward against the risk that an undiscovered triggering event could have occurred so as to render the assets of OYSF subject to the security charge in favour of EIB and therefore unavailable to satisfy the note.
[23] Contrary to the appellant's submission, the trial judge did not assume an imprudent purchaser in reaching this conclusion. Rather, he accepted the respondent's expert evidence that, given the way vulture funds operate, a vulture fund acting prudently would be satisfied with the limited due diligence available to it to assess the possible occurrence of a triggering event and would deal with this uncertainty by discounting its offer price accordingly. This expert evidence proceeded not on the assumption that no triggering event had occurred but, rather, on the basis that there was uncertainty on this score which would cause a vulture fund purchaser to offer a discounted price. It was entirely open to the trial judge to accept this evidence in determining the fair market value of the OYSF note.
[24] Nor are the appellants correct to argue that the trial judge also assumed an imprudent vendor in arriving at his conclusion about the fair market value of the OYSF note. The imprudence advanced by the appellants is that OYDL as the vendor of the OYSF note would have to know that in order to realize value from the note any purchaser would immediately put OYSF and thus OYDL itself into bankruptcy to preempt a subsequent triggering event in favour of EIB. While this was so, and the trial judge clearly understood it, the error in this submission is that it seeks to inject into the analysis factors subjective to the circumstances of [page551] OYDL as vendor and not intrinsic to the value of the OYSF note. The calculation of fair market value does not permit this but rather must assume an unconstrained vendor.
[25] The appellants further argue that the trial judge erred in determining the fair market value of the OYSF note by reference to a transaction which was entirely speculative because it was never considered by OYDL nor would it have been since it would have resulted in OYDL's own bankruptcy. I disagree. The transaction hypothesized by the trial judge was one between a notional, willing, prudent and informed vendor and purchaser based on factors relevant to the OYSF note itself rather than the particular circumstances of OYDL as the seller of the note. This is an entirely appropriate way to determine the fair market value of the OYSF note.
[26] Finally, the trial judge did not err in not discounting the fair market value of the OYSF note for any alleged equitable set off OYSF would have against OYDL or any purchaser of the note. Such a claim could arise only once the OYSF equities pledged to guarantee OYDL debts had been sold by OYDC creditors and at the date of the transaction no such claim existed. OYSF would thus have had no set off claim when the purchaser of the OYSF note put it into bankruptcy immediately upon making the purchase.
[27] The appellants' third attack on the trial judge's s. 100 analysis focuses on his finding that the additional OYRC shares received by OYDL in the transaction had no value. The trial judge based this conclusion in part on his finding that at the date of the transaction the U.S. real estate assets underlying OYRC (and therefore OYRC itself) had a negative value because their debt load exceeded their market value. In making this finding the trial judge relied primarily on the opinion to that effect of Citibank, OYRC's principal banker. The Citibank evidence was given by one of its executives who in turn relied on reports by Citibank experts concerning U.S. real estate values. These experts were not themselves called at trial and the appellants objected to admitting their reports for their truth, although the appellants did not challenge the admissibility of Citibank's own opinion as distinct from the reports of its experts.
[28] The trial judge found that he could rely on Citibank's own opinion as a foundation for his conclusion that at March 16, 1992, the OYRC real estate interests (and hence OYRC itself) had a negative value and therefore shares in OYRC were worth nothing. The trial judge concluded that he could do so both because Citibank was a significant creditor who could therefore be considered a privy of OYRC and because of Citibank's experience in the U.S. real estate market. [page552]
[29] In my view, his first reason is erroneous. There was no privity between Citibank and the appellants that would warrant treating the reports of the Citibank experts as admissions of the appellants and therefore admissible for the truth of their contents. Citibank and the appellants shared no privity of title. Nor was it enough that Citibank was a significant creditor of the appellants. Indeed, I think that the divergent interests of creditor and debtor make it unwarranted to take the statements of one about the value of the security underlying the debts as admissions by the other, based on privity. There was simply not a sufficient identity of interest to permit the admissibility of the reports of the Citibank experts as the admissions of the appellants. See J. Sopinka, S.N. Lederman and A.W. Bryant, The Law of Evidence in Canada, 2nd ed. (Toronto: Butterworths, 1999), at p. 302.
[30] In the end I do not think this matters, because I see no error in the other reason offered by the trial judge for accepting the opinion of Citibank as a basis for finding that as of March 16, 1992, the OYRC real estate interests had a negative value and therefore so did OYRC. The opinion of Citibank itself as to the value of the OYRC real estate was not that of an expert qualified by the court to give an opinion on the value of U.S. real estate. However, it was the opinion of a major lender whose commercial success depended in part upon its deep interest in and experience in the U.S. real estate market. As such its opinion was no doubt admissible. Indeed, the appellants did not dispute that at trial, quarrelling only with the admission of the reports of Citibank's own experts. The weight to be given to the Citibank opinion was a matter for the trial judge and I see no palpable and overriding error in his use of that evidence as one basis to come to his factual conclusion about the worth of OYRC at the date of the transaction.
[31] Moreover, the trial judge had before him significant additional expert evidence that the fair market value of OYRC as a whole was negative both before and after the transaction. In particular, there were two appraisers' reports admitted on consent concerning the value of OYRC's U.S. real estate and the respondent's expert evidence concerning OYRC's non-real estate assets. There was thus an ample basis for the trial judge to conclude that at the relevant time the value of OYRC was negative and the fair market value of shares in OYRC including the additional shares received by OYDL in the transaction was nil.
[32] The trial judge also rejected the appellants' expert evidence that the potential for a rebound in the value of the assets of OYRC gave the shares in OYRC some value. He did so on the [page553] basis that there was no evidence that this turnaround was a reasonable expectation. This was a conclusion he was perfectly entitled to draw, given the record before him.
[33] In short, there was no palpable error in the trial judge's finding that since the assets underlying OYRC had negative value at the relevant times, OYRC's shares, including the additional shares received by [OYDL], were worthless.
[34] Nor did the trial judge err when he confirmed this conclusion by saying that the transaction of March 16, 1992, added no value to OYRC and that the original 100 per cent of the shares in OYRC were worth exactly the same as those shares taken together with the additional shares received by OYDL in the transaction, namely nil. The trial judge made clear that this represented both the value of the additional OYRC shares to OYDL and their fair market value given that OYRC then had a negative value.
[35] To summarize, save for the one narrow finding I have referred to I can find no reversible error in the trial judge's determination that the fair market value of the OYSF note given up by OYDL was between $30 to $50 million and the fair market value of the additional OYRC shares it received was nil. As I have explained, in neither case did the trial judge depart from a proper fair market value analysis to value the note or the additional shares simply to OYDL. And by any measure the disparity between $30 to $50 million and nil is a conspicuous difference for the purposes of s. 100 of the BIA.
[36] The trial judge's final step was to examine the equities in the exercise of the residual discretion given to him under s. 100(2) of the BIA. Here too the appellants say he erred.
[37] In my view, this argument must also fail. There is limited scope for appellate intervention in the exercise of this sort of discretion at first instance. There was no error in principle in the exercise undertaken here. The trial judge was clearly alive to the considerations relevant to the exercise of his discretion. He drew on the factors outlined by this court in Standard Trustco Ltd. (Trustee of) v. Standard Trust Co. (1995), 1995 3508 (ON CA), 26 O.R. (3d) 1, 129 D.L.R. (4th) 18. He made clear the obligation on the appellants to establish the equities which they say disentitle the respondent to relief. He found that it was not enough for the appellants to point to the broad provision of security that OYSF had historically given to OYDL since that was in place prior to, and independent of the transaction. Nor was he persuaded by the appellants' assertion that the transaction had to be undertaken to provide HKBC with a solvency certificate of OYSF. The trial judge concluded that a solvency certificate not required by statute was not an equitable basis to decline to order a s. 100 remedy. He found that the fair [page554] value to OYDL of the additional shares in OYRC was nil (as was their fair market value) because OYDL already owned 100 per cent of OYRC. Beyond these factors the trial judge found that the appellants had merely made vague allegations but had not proven any facts so as to warrant equitable relief. I cannot say that anything in this analysis constitutes reversible error.
[38] I therefore conclude that the appellants' various challenges to the trial judge's s. 100 conclusion must all fail.
The Section 248 Issues
[39] The trial judge concluded that the circumstances here made this a proper case to allow the respondent trustee in bankruptcy to be a complainant and seek an oppression remedy pursuant to s. 248 of the OBCA. He went on to find that the transaction was oppressive in that it unfairly disregarded the interests of the creditors of OYDL and concluded that this served as a second basis for the remedy that was appropriate under s. 100 of the BIA.
[40] In this court the appellants attack both the finding that the respondent was a proper complainant and the finding that the transaction was oppressive.
[41] Section 245 of the OBCA sets out the definition of "complainant" for the purposes of seeking an oppression remedy under s. 248. The trial judge acted here pursuant to s. 245(c) which gives the court a discretion to determine who is a proper person to be a complainant. The definition of "complainant" in s. 245 reads as follows:
- In the Part . . .
"complainant" means,
(a) a registered holder or beneficial owner, and a former registered holder or beneficial owner, of a security of a corporation or any of its affiliates,
(b) a director or an officer or a former director or officer of a corporation or of any of its affiliates,
(c) any other person who, in the discretion of the court, is a proper person to make an application under this Part.
[42] Section 248(2) is also a discretionary provision. Indeed it gives the court a double discretion. The court must first satisfy itself that the act in question constitutes oppression and having exercised its discretion to come to that conclusion the court may order a remedy. Section 248(1) and (2) read as follows:
248(1) A complainant and, in the case of an offering corporation, the Commission may apply to the court for an order under this section. [page555]
(2) Where, upon an application under subsection (1), the court is satisfied that in respect of a corporation or any of its affiliates,
(a) any act or omission of the corporation or any of its affiliates effects or threatens to effect a result;
(b) the business or affairs of the corporation or any of its affiliates are, have been or are threatened to be carried on or conducted in a manner; or
(c) the powers of the directors of the corporation or any of its affiliates are, have been or are threatened to be exercised in a manner,
that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer of the corporation, the court may make an order to rectify the matters complained of.
[43] Both of the findings which the appellants challenge constitute exercises of discretion and are therefore entitled to deference in this court. Unless the trial judge erred in principle or made a significant error in determining and weighing the considerations relevant to these findings they are beyond the scope of appellate review.
[44] In challenging the determination that the respondent can be a complainant the appellants argue that the trial judge erred in principle because that status can never be conferred on a trustee in bankruptcy where the bankrupt was a party to the transaction which is said to be oppressive. The appellants say that the decision of Houlden J.A., sitting as a General Division judge in Canada (Attorney-General) v. Standard Trust Co. (1991), 1991 7176 (ON SC), 5 O.R. (3d) 660, 84 D.L.R. (4th) 737, stands for this proposition.
[45] It may be that the finding in that case is simply that in the circumstances there the trustee in bankruptcy would not be given a remedy under s. 248 and therefore ought not to be accorded standing as a complainant. If, however, that case sets out the absolute prohibition contended for by the appellants, as I tend to think it does, then despite the great respect due its author I would disagree. The simple reason is that s. 245(c) confers on the court an unfettered discretion to determine whether an applicant is a proper person to commence oppression proceedings under s. 248. This provision is designed to provide the court with flexibility in determining who should be a complainant in any particular case that accompanies the court's flexibility in determining if there has been oppression and in fashioning an appropriate remedy. The overall flexibility provided is essential for the broad remedial purpose of these oppression provisions to be achieved. Given the clear language of s. 245(c) and its purpose, I think that where the bankrupt is a party to the allegedly [page556] oppressive transaction, the trustee is neither automatically barred from being a complainant nor automatically entitled to that status. It is for the judge at first instance to determine in the exercise of his or her discretion whether in the circumstances of the particular case, the trustee is a proper person to be a complainant.
[46] In this case the appellants were affiliates of OYDL, the party with which the allegedly oppressive transaction was concluded. In that transaction, OYDL gave up something of significant value (the OYSF note) in return for something of no value (additional shares in OYRC). It would have been reasonable for the trial judge to conclude that since the appellants unfairly disregarded the interests of the OYDL creditors, those creditors have properly been recognized as complainants. Thus, it was equally reasonable in the circumstances for the trial judge to find that this was a proper case in which to conclude that the trustee of OYDL was a proper person to be a complainant in effect on behalf of the creditors of OYDL. This conclusion is consistent with the bankruptcy principle of collective action to pursue the claims of the creditors of the bankrupt and the trustee's role as their representative. See Husky Oil Operations Ltd. v. Canada (Minister of National Revenue), 1995 69 (SCC), [1995] 3 S.C.R. 453, 128 D.L.R. (4th) 1. The appellants have put forward no reason why this principle should not be followed in this case. The trial judge therefore exercised his discretion reasonably in finding that the respondent was a proper person to be a complainant here and I would dismiss the appellants' first argument.
[47] The appellants' second argument is that the trial judge ought not to have found the transaction to be oppressive. In essence the appellants say that this was an ordinary course transaction reflective of normal business decisions. The trial judge however found that the exchange of a note of substantial value for shares worth nothing inappropriately deprived the OYDL creditors of a very significant value to which they would otherwise have been entitled. He found that by participating in this transaction the appellants had unfairly disregarded the interests of those creditors. He was satisfied that in this way the transaction effected an oppressive result. In my view, it was entirely reasonable for the trial judge to focus on these aspects of the transaction in coming to his conclusion. He properly exercised his discretion and this court should not interfere. Therefore the appellants' second argument also fails.
[48] In summary, the appeal must be dismissed. The respondent acknowledges that a costs order against the appellants would be of academic interest only in these circumstances. There [page557] is no point in making such an order here. Therefore there will be no costs of the appeal.
Appeal dismissed.