Focus On

CORPORATIONS - Oppressive or unfairly prejudicial conduct

Wednesday, October 31, 2018 @ 8:36 AM  


Lexis Advance® Quicklaw®
Appeal by MacMillan, Highlands LLC, and Highlands LLP, from an oppression ruling in favour of two shareholder petitioners of Purcell Basin Minerals, Radford and Lacey. MacMillan was the sole director, president and officer of Purcell. The petitioner shareholders alleged MacMillan engaged in oppressive or unfairly prejudicial conduct that had harmed their interests. Their complaint focused on a series of transactions through which MacMillan caused Purcell to issue shares to himself or companies he controlled, thereby effectively giving him control of the company to safeguard against an anticipated attempt by shareholders to remove him from his position. MacMillan also used that control to grant himself a favourable compensation package he failed to disclose to shareholders, and to extend secured loans from Purcell to his private companies. MacMillan took the position that his conduct was consistent with Purcell's best interests. The trial judge found that MacMillan's conduct constituted oppression and granted a series of remedies that effectively set aside the impugned transactions. MacMillan and his companies appealed.

HELD: Appeal dismissed. The trial judge recognized that Purcell's unique history and circumstances with its stakeholders generated reasonable expectations regarding its management. The judge examined the effect of the impugned transactions on the interests of different shareholders, most particularly their consequences for control of Purcell. The judge did not err in concluding that the transactions differentially affected the interests of the petitioners in relation at least to control and influence. To the extent the judge erred in founding the conclusion of harm based on the impact of the petitioners as stakeholders in a separate company, it did not impact the overall decision. The trial judge did not err or misapprehend corporate governance principles in finding that MacMillan's conduct was driven by improper motives, lacked probity, and sought to advance his own interests at the expense of other shareholders of Purcell, contrary to their reasonable expectations. Nor did the trial judge err in inferring the reasonable expectations of the petitioners from the objective circumstances, and in defining the scope of those expectations. The remedies granted were appropriate and within the trial judge's discretion.

Radford v. MacMillan, [2018] B.C.J. No. 3143, British Columbia Court of Appeal, E.A. Bennett, D.C. Harris and S.A. Griffin JJ.A., September 10, 2018. Digest No. TLD-October292018005