One of my mentors used to say to me that to be a good lawyer you needed to learn to skate backwards. The value of this metaphor is evident from the Divisional Court’s decision in Basegmez[i].
In Basegmez: 3 partners/shareholders invested in an hotel and condo project; 1 of them was responsible for day to day management; the other 2 commenced an oppression remedy proceeding against the managing shareholder; the judge found that the managing shareholder engaged in oppressive conduct by issuing shares to himself to gain voting control, causing the corporation to enter deals with corporations he controlled and used the corporation’s money for his own purposes and, as such, ordered that a liquidator be appointed and the corporation’s assets be sold as part of a winding up of the corporation as the applicable remedy for the oppression.
The managing shareholder appealed to the Divisional Court. The Divisional Court upheld the findings of oppressive conduct. With respect to the managing shareholder’s argument that the appointment of a liquidator and a winding up was over-kill, and that the judge should have ordered the managing partner to buy out the others at fair market value, the Divisional Court, in part, said:
[21] The appellants did not ask Lederman J. to order Mr. Akman to buy out the respondents’ shares at fair market value. Instead, they argued that the court should not interfere with the Akman`s control of Tarn. They did not address any process for separating the parties’ respective investments in the corporation. Lederman J. noted that he was faced “only with the choice of continuing the status quo or ordering that there be a winding up. No other option was provided by [the appellants]…”
[22] Mr. Hall argues forcefully that Lederman J. erred in principle by failing to consider a different outcome despite his clients’ tactical decision to leave a stark all-or-nothing choice to the judge below. It is not an error for the judge to fail to impose an outcome that the appellants never sought.
[emphasis added]
Therein lies the value of providing the court, ‘in the alternative’, with a practical common-sense remedial solution, that takes into consideration everyone’s interests, just in case your client loses on oppression. Be ready. Your client may lose on the question of oppression despite the confidence you and your client have in the case.
A good defence is as valuable as a good offence.
[i] Basegmez et al. v. Akman et al., 2018 ONSC 812
Tags: CBCA, liquidation, OBCA, oppression, remedies, shareholder