346 THE ADVOCATE
VOL. 80 PART 3 MAY 2022
Is a system that requires an aggrieved shareholder to endure a decade’s
worth of litigation in order to be bought out of his minority share in a business
the best system that we can devise?
FACTS AND HISTORY
Dubois was in charge of the purchasing side of the business, as well as anything
related to the hiring and training of employees, plus human
resources. Dubois became the general manager of Lucid in 2000, the year
he acquired the forty-five per cent minority ownership interest in Lucid.
Milne was Lucid’s CEO and CFO and controlled a fifty per cent interest, as
well as all voting shares.
Milne was absent from the business and hospitalized for a period at the
end of 2009. When Milne returned to the office in 2010, relations between
Milne and Dubois soured. Milne had begun making disparaging remarks
about Dubois and avoiding him. Milne, as the only voting shareholder, voted
to increase his own compensation from $60,000 to $225,000 a year, a dramatic
increase.
Importantly, after his return and for two years, Milne withheld dividends
from Dubois, which Dubois ought to have been entitled to under the parties’
shareholders agreement. The court found and the parties agreed that dividends
were to be paid on all net income. In 2011 alone, Lucid had a net
profit after taxes of over $573,000, but paid out only $100,000 in dividends.
Dividends were a substantial part of Dubois’s remuneration. The court also
found that it was a reasonable expectation of Dubois to expect to be paid dividends
that he was owed upon termination of employment.
Dubois was dismissed from his employment with Lucid on January 4,
2011, and Milne refused to agree to distribute tens of thousands of dollars in
dividends.
Dubois’s wrongful dismissal claim for damages was settled in 2016.
But Dubois’s equity was still locked up in Lucid. His recourse was to press
on with a court proceeding for a remedy called an oppression remedy.
Oppressive conduct is conduct that is “burdensome, harsh or wrongful” or
conduct that “lacks probity and fair dealing” in the business of a company.2
It can include conduct that causes prejudice to some of a company’s shareholders.
Individuals who own shares in a business have rights, expectations
and obligations that are separate from the company; courts will step in, in
appropriate circumstances, to protect a shareholder’s interest. This is an
equitable remedy that is granted at the discretion of the court on specific
facts, which means that not everyone who seeks an oppression remedy will
be fortunate enough to obtain such an order.