(The full version of this bulletin was originally published on Fasken.com – “The Supreme Court of Canada rules on the personal liability of directors in the context of the oppression remedy” – July 17th, 2017.)
The Supreme Court of Canada rendered a decision in Wilson v. Alharayeri, in which it discusses situations that could lead to the personal liability of a corporate director in the context of an action for corporate oppression under section 241 of the Canada Business Corporations Act (‘‘CBCA’’).
The Court stated that there is no doubt that a director can be held personally liable under this provision, as it confers broad powers to the courts and provides an impressive number of remedies in favour of the complainant. The Court added, however, that section 241 does not identify the situations in which an order for compensation may properly lie against the corporate directors personally, as opposed to the corporation itself. This question was the focus of the Supreme Court’s decision.
In line with the decisions rendered by the Superior Court and the Quebec Court of Appeal, the Supreme Court held that the two directors were personally liable considering that (i) the oppressive conduct was properly attributable to them because of their personal involvement in the oppressive conduct and (ii) this personal liability was relevant in light of the circumstances. In doing so, the Supreme Court refused to depart from the lessons learned from the Ontario Court of Appeal’s decision in Budd v. Gentra Inc (hereafter ‘‘Budd’’).
In reaching this conclusion, the Supreme Court of Canada reiterates that the remedial purpose of the oppression remedy is one of commercial fairness. As such, the slavish respect of rigid criteria is to be avoided in favor of an analysis of the circumstances of each particular case. Having said this, the good or bad faith of the director and whether or not he obtained personal gain are factors to consider.