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Dispute over Share Pricing Method Does Not Constitute Shareholder Oppression

In Svensrud v Saskatoon Boiler MFG. Co. Ltd. the Court of Queen’s Bench determined that a dispute between a shareholder and the corporation over the accuracy of the pricing method outlined a Unanimous Shareholders Agreement (“USA”) does not constitute shareholder oppression under the Canadian Business Corporations Act (the “CBCA”).

The plaintiff was one of four shareholders in the corporation and party to the USA in effect. The USA contained the relevant provisions in the case of the departure of a shareholder from the corporation. Upon the shareholder leaving the corporation, his or her shares would be repurchased at the full market value as determined by the corporation’s accountant. The plaintiff took issue with the price determined by the corporation, namely the combination of book values and values provided by the corporation. The plaintiff contended the value was too low and brought an action against the corporation claiming that he was being oppressed.

The application was brought under the Canadian Business Corporations Act (“CBCA”), in which the relevant provisions are identical to those found in the Saskatchewan Business Corporations Act. The Court held the plaintiff was entitled to bring the present action as he met the definition of the complainant in his capacity as a shareholder. The main issue to be determined by the Court was whether he was entitled to a remedy. This process involves two steps, the first determining whether the complainant’s expectations of the corporation’s actions were reasonable and whether this expectation was breached. If this is satisfied, the second step is to then determine whether the activity of the corporation amounts to “oppression”, “unfair prejudice” or “unfair disregard” of the complainant’s interests. This conduct requires coercive, abusive or acts of bad faith on behalf of the corporation.

The Court held that the plaintiff had established the first criteria in that he had a reasonable expectation to receive full market value for his shares, as evidenced by the USA. However, the second component was not met as the behaviour of the corporation did not amount to oppression, unfair prejudice or unfair disregard. The Court classified the discrepancy between share pricing methods as a straight forward dispute, not oppressive or bad faith behaviour from the corporation. There was no evidence of misconduct of the other directors or the accountant of the corporation. A dispute of this nature did not meet the threshold of oppressive or bad faith behaviour required of the corporation in order for the Court to grant a remedy pursuant to the CBCA. Therefore, the plaintiff’s application was dismissed.

Svensrud v Saskatoon Boiler MFG. Co. Ltd. 2014 SKQB 263