The oppression remedy can be used to impose personal liability against a party involved in the oppression. Because personal liability runs counter to the long-established rule that liability does not pass through the corporate veil, courts have hesitated to impose personal liability in oppression cases (para 37).
In common law, piercing the corporate veil generally requires that the corporation is the ‘alter ego’ of the wrong-doer (para 37), that the wrong-doer acted for his own gain (para 45) at the expense of the victim of some corporate action.
Wilson v. Alharayeri [2017] 1 SCR 1037 makes it clear that applying personal liability under the oppression remedy does not require all of the common law necessary conditions.
What does not have to be proved?
In particular, the wrong-doer need not be the controlling party behind the corporation. (para 39-40)
Bad faith does not have to be established against the wrong doer to impose personal liability (para 41,45,46).
The wrong-doer need not gain from the corporate-wrong done to the victim (para 44).
What does have to be proved?
The director must have done or failed to do something he would otherwise be required to do, as a necessary but not sufficient condition (para 48).
What happened in this case?
The facts in Wilson v. Alharayeri [2017] 1 SCR 1037, were that Alharaveri, was the holder of class A, B and C shares. Because of an earlier dispute, when time came to exchange share classes for common shares so that a private placement could proceed, Wilson advocated a scenario where Alharveri’s Class A and B were left stranded (not turned into common). (para 12,19,39).
Wilson was not in control, he and his co-defendant Black merely advocated penalizing Alhareri. He and fellow defendant Black were the audit committee. (para 7).
They argued that Alharaveri’s ‘loss’ was not their ‘gain’. They did not directly profit from his non-conversion. Though the court found that overall they did (as is obvious) gain from the non-participation by a major potential shareholder, there was no requirement that they directly gain (para 44,45).
Further important result
The court clearly found that discriminating against a class of shareholders by leaving their shares un-converted while other shareholders and/or classes were converted, is oppression (para 66).
