Paul et al. v. 1433295 Ontario Limited et al.
[Indexed as: Paul v. 1433295 Ontario Ltd.]
Ontario Reports
Ontario Superior Court of Justice,
Nolan J.
December 13, 2013*
120 O.R. (3d) 339 | 2013 ONSC 7002
Case Summary
- This judgment was recently brought to the attention of the editors.
Corporations — Oppression — Majority shareholder following lawful process under Business Corporations Act to break stalemate with minority shareholders over raising additional funds — Corporation adopting resolution to exchange minority shareholders' shares for worthless scrip certificates — Issuance of scrip certificates undertaken to squeeze out minority shareholders without compensation and not for legitimate business purpose — Conduct oppressive — Minority shareholders' damages minimal as they had exercised their rights as dissenting shareholders under s. 185 of Ontario Business Corporations Act and were paid court-determined value for their shares — Damages set at $45,000 — Business Corporations Act, R.S.O. 1990, c. B.16, s. 185.
Equity — Laches — Limitations Act, 2002 applying to oppression remedy claims under s. 148 of Ontario Business Corporations Act — Equitable doctrine of laches not applying where claim for oppression remedy is brought within limitation period — Business Corporations Act, R.S.O. 1990, c. B.16, s. 148 — Limitations Act, 2002, S.O. 2002, c. 24, Sch. B. [page340]
In order to break a stalemate between the defendant majority shareholder and the plaintiff minority shareholders over raising additional funds, the corporation adopted a resolution to exchange the ten common shares held by each of the plaintiffs to one-quarter of one common share and issue scrip certificates for the fractional shares. The plaintiffs brought an action for relief under ss. 185 and 248 of the Business Corporations Act ("OBCA"). The defendants sought leave to amend the statement of defence to include a defence of laches.
Held, the action should be allowed.
The request to amend the statement of claim was denied. The Limitations Act, 2002 applies to oppression remedy claims under s. 148 of the OBCA. The equitable doctrine of laches does not apply where a claim for an oppression remedy is brought within the limitation period.
Under s. 185 of the OBCA, the fair value of the plaintiffs' shares on valuation day was set at $17,000 per share.
While the defendant majority shareholder employed a lawful procedure available under the OBCA to break the stalemate, the manner in which he exercised it rendered the plaintiffs' shares worthless. They could not exchange the fractional share scrip certificates for a full share. The real purpose of the resolution was to squeeze out the plaintiffs. The conduct was oppressive under s. 248 of the OBCA. The plaintiffs' damages were minimal as they had exercised their rights pursuant to s. 185 of the OBCA and were being paid out a court-determined value of their shares. Damages were set at $45,000.
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ACTION for remedies under ss. 185 and 248 of the Business Corporations Act
William V. Sasso and Jacqueline A. Horvat, for plaintiffs.
Dante D. Gatti, for defendants.
NOLAN J.: —
(The full reasons for decision follow exactly as reproduced in the source, beginning with “Introduction” and continuing through paragraph [130], “Action allowed.” and the notes section.)