Written by Ty Schmidt, supervised by Darcy MacPherson
The recent decision of Wu v. Emme Distributor Inc., 2022 BCSC 635, provides a useful snapshot of various actions that can be grounds for a successful oppression claim. Of further interest is the fact that the corporation in this case is closely held by only two shareholders which highlights the potential uses of the oppression remedy outside of a large corporate context.
Emme Distributor Inc. (“Emme”) is a holding company that owns three subsidiaries that had collectively owned a number of properties in Surrey, BC. Emme has two shareholders – Mr. Li and Ms. Wu, who had owned 55% and 45% of the shares, respectively. After Emme had faced financial hardships and the relationship between its two shareholders had soured, the Surrey assets were sold. However, Ms. Wu had a number of expectations, pursuant to a series of signed agreements, regarding what should be done with the proceeds of the sale that went unrealized and so she sued for an oppression remedy against Mr. Li and Emme.
Ms. Wu made a claim for five separate expectations that went unmet. Three were successful, including the claim that Ms. Wu was replaced by two non-shareholders as the companies’ directors, contrary to an agreement that Ms. Wu would remain a director. The claim that garnered the greatest discussion was the fact that Mr. Li had breached his promises to make personal payments to, and on behalf of, the companies by repaying a personal loan from Ms. Wu using the companies’ funds. This had the effect of Ms. Wu essentially being repaid a significant portion of the money she loaned personally to Mr. Li with her own funds.
In sum, the terms of signed agreements will generally be viewed as reasonable expectations. When such expectations are owed by a majority shareholder to a minority shareholder, breaching such terms will most likely be open to an oppression remedy if the breach has an unfair or prejudicial effect.
The views and opinions expressed in the blogs and case reporter are the views of their authors, and do not represent the views of the Desautels Centre for Private Enterprise and the Law, the Faculty of Law, or the University of Manitoba. Academic Members of the University of Manitoba are entitled to academic freedom in the context of a respectful working and learning environment.