Types of Statutory Procedural Remedies in Corporate Law

Jeffery v. London Life Insurance Company, 2011 ONCA 683 was released late today. The decision is lengthy and deals with specific issues in insurance law. In so doing, however, the Court makes useful distinction among statutory corporate remedies:

(c) Three Types of Statutory Procedural Remedies

[146]     In the corporate law world, the common law was not kind to minority shareholders and others with legitimate complaints about the majority conduct of corporate affairs.  A long line of jurisprudence anchored the view that only a corporation could sue for a wrong done to it and – save for limited exceptions not relevant here, such as fraud on the minority – the courts would not interfere in the internal affairs of the corporation unless the corporate conduct was not within the corporation's powers.  This was known as the rule in Foss v. Harbottle (1843), 67 E.R. 189 (Eng. V.C.) and was cemented in place by the decision of the Privy Council in Burland v. Earle, [1902] A.C. 83, at p. 93, where Lord Davey stated:

It is an elementary principle of the law relating to joint stock companies that the Court will not interfere with the internal management of companies acting within their powers, and in fact has no jurisdiction to do so.  Again, it is clear law that in order to redress a wrong done to the company or to recover moneys or damages alleged to be due to the company, the action should prima facie be brought by the company itself.

[147]     In the latter part of the twentieth century, however, legislators in Canada (and elsewhere) implemented measures to address this corporate imbalance of power.  They did so by introducing a number of procedural statutory measures providing access to the courts for minority shareholders and other "complainants" previously denied redress in such circumstances.  These measures included three types of procedural remedies:  statutory derivative actions, compliance provisions, and oppression remedies. 

[148]     The statutory derivative action (or, as Professor Welling would have it, the statutory representative action) enables disgruntled "claimants" to bring an action in the corporate name for a wrong done to the corporation that the corporation will not seek to redress (perhaps because the wrongdoers control the corporation):  see Welling,  at pp. 526-528.  That is not this case.  Corporations cannot sue themselves to force themselves to comply with their controlling statutes, regulations, articles of incorporation, or by-laws.  Hence, the creation of a second type of remedy, the "compliance" provisions — enacted to bridge that gap and to enable "claimants" to obtain orders forcing corporations to comply with the statutory framework and constating documents governing them. Although the discretion involved in making a compliance order is broad, the object of this second type of remedy, it seems to us, is to ensure corporate compliance and not to provide an individual fix. 

[149]     The oppression remedy, on the other hand – the third, and by far the most wide-reaching of the statutory remedy trio – was developed to do just that, that is, to provide a broad-ranging authority and discretion in the court to remedy a wrong to individual complainants as a result of conduct by the corporation or its majority that is prejudicial to the individual.

[150]     While there may be some overlap between these statutory remedies, in the sense that the oppression remedy is much broader and may lead to the type of orders made in statutory representative actions or compliance proceedings, the three remedies are different.