Oppression Remedies May Be Lost Through Delay
By Carolyn Brandow
If the affairs of a company are conducted in a manner that is unfairly prejudicial to or that unfairly disregards the interests of a complainant (such as a shareholder, director or officer), that person may want to seek out an oppression remedy in a lawsuit or application to the court. If steps are not taken to pursue the remedy quickly, within the applicable limitation period, the chance to obtain a remedy may be lost.
In a corporation, there can be a series of oppressive acts over a number of years (e.g. a concerted, ongoing effort by a director to exclude and prejudice a shareholder) or a single act which is oppressive (e.g. the sale of a specific asset which is designed to and does harm a specific shareholder).
There has been some uncertainty and several disputes about when a two year limitation period under the Ontario Limitation Act, 2004 applies to bar oppression remedy claims. Do you need to sue when you learn of the first oppressive act or the last act in a chain of acts? This issue was discussed in a recent decision by the Court of Appeal for Ontario - Maurice v. Alles, 2016 ONCA 287 (CanLII).
In Maurice v. Alles, the Court of Appeal held that a continuous refusal to produce documents does not cause a limitation period to be extended. The Court of Appeal commented in the decision that courts “must be careful not to convert singular oppressive acts into ongoing oppression claims in an effort to extend limitation periods.” This decision makes it clear that you may lose your right to your claim and remedy if you wait until the last refusal to sue over the previous refusals. In other words, the repetition of the same oppressive act does not re-start the limitation period.
On the other hand, the courts need to be mindful of the risk that someone who commits oppression could escape liability if they can successfully argue that all of the acts were part of the same corporate scheme such that the limitation period begins to run when the other side learned of the first act, not the last act. According to the Court of Appeal in Maurice v. Alles, in analyzing the allegedly oppressive conduct, courts should have regard to the remedial nature of the oppression remedy and the fact that the oppression remedy is designed to respond to the broadest range of corporate malfeasance. The courts should seek to determine whether there were any discrete acts of oppression within the two-year period prior to the commencement of the lawsuit or application. Parties should not be permitted to take additional oppressive steps in furtherance of, or based upon, the initial oppressive conduct and hide behind a limitation period based on the initial oppressive step.
While this decision will assist a complainant seeking a remedy to address oppressive conduct to try to overcome a limitation defence, it also highlights the areas where there will be ongoing disputes - characterizing conduct as “ongoing, repetition of conduct” versus “discrete acts” will have a significant impact on whether claims will be barred if commenced more than two years later. Waiting longer than two years from the initial knowledge of oppressive acts remains risky and action should be taken promptly to avoid having claims barred.