In Rooney v ArcelorMittal[1], the Plaintiffs sought certification of a proposed shareholder class action arising out of the events leading up to the successful takeover of Baffinland Iron Mines Corporation (“BIM”). The key issue in dispute was certification of claims for relief from oppression pursuant to section 248 of Ontario’s Business Corporations Act[2]. Justice Rady, writing for the Superior Court, confirmed that oppression remedy claims were certifiable and certified the Plaintiffs’ particular oppression claims.[3]
There are two necessary components for a successful oppression remedy claim:
- the plaintiff’s reasonable expectations as to the conduct of the business and affairs of the corporation; and
- the violation of those reasonable expectations by the defendant in manner that is oppressive, unfairly prejudicial or that unfairly disregarded a relevant interest.[4]
On a motion for certification, the plaintiff is not required to prove her claim but only has to establish the actions suitability for prosecution as a class proceeding by satisfying the requirements of section 5 of the Class Proceedings Act, 1992[5]. In Rooney, the oppression remedy certification dispute centered on whether the claim gave rise to common issues (s. 5(1)(c) of the Class Proceedings Act, 1992). The existence of common issues turned on the nature of reasonable expectations and the type of proof required to establish those expectations.
The Defendants argued that to establish a class member’s reasonable expectation it must be proven that they subjectively held the expectation alleged, detrimentally relied on that expectation and the expectation was reasonably held. The Defendants position, in effect, was that reasonable expectations are inherently individual in nature. As a result, reasonable expectations in the oppression remedy context do not raise common issues and relief for oppression cannot be sought via class proceedings.[6]
The Plaintiffs, on the other hand, argued that some reasonable expectations—such as the expectation of fair treatment and those created by a Defendants’ public disclosures—are objective in nature and, thus, amenable to proof on a class wide basis.[7]
Justice Rady agreed with the Plaintiffs. Her Honour held that shareholders have both subjective and objective reasonable expectations. The objective component of reasonable expectations are things that every shareholder would expect and, so, can be proven on a class wide basis. Moreover, to the extent a reasonable expectation has a subjective component it may still be capable of proof on a class wide basis. As with other facts, expectations may be proven by inferences from circumstantial evidence—direct testimony from each class member is not a necessity.[8]
Justice Rady reached these conclusions by relying on a long line of jurisprudence, including cases from the Ontario Court of Appeal and Supreme Court of Canada.[9] In BCE Inc., the Supreme Court held that reasonable expectations are “objective and contextual”—the expectations of a particular shareholder are not conclusive.[10] For instance, “it may be readily inferred that a stakeholder has a reasonable expectation of fair treatment.”[11]
Moreover, in Ford Motor Company of Canada, Ltd. v. Ontario Municipal Employees Retirement Board the Ontario Court of Appeal held that direct testimony from shareholders was not required to establish reasonable expectations in the case of widely held public companies. Instead, it “is open to the trial judge to infer reasonable expectations from the company’s public statements and the shared expectations about the way in which a public company should be run.”[12] Indeed, the ability to establish reasonable expectations by inference is critical for the viability of the oppression remedy in the context of widely held public companies.[13]
The reasonable expectations advanced by the Plaintiffs in Rooney—such as an expectation of compliance with the law and fair treatment—were objective in nature. They were the kind that every shareholder would hold. Accordingly, the Plaintiffs oppression claims gave rise to common issues and were appropriately prosecuted through a class proceeding.[14]
Following Justice Rady’s decision, some of the Defendants sought leave to appeal to the Divisional Court. Leave to appeal was denied on the basis that Her Honour’s decision “followed appellate precedent and correctly concluded that oppression claims do not necessarily require explicit evidence of the expectations of each individual shareholder.”[15]
Rooney is an important decision from an access to justice perspective. The core of the Defendants’ argument on the oppression remedy commonality issue is that oppression claims can never be advanced as a class proceeding. In the context of large publically held companies, this would leave retail investors without a feasible prospect of seeking compensation for oppressive conduct. Indeed, the resource differential, along with the high costs and risks of litigation compared to the possible monetary compensation for the retail investor, would make it irrational for most to pursue such a claim on an individual basis.
Garett Hunter is an associate in Siskinds’s class action department. His practice focuses on investor protection. He is co-counsel for the class in Rooney v ArcelorMittall. For more information on the case visit Class Counsel’s Baffinland Iron Mines Corporation webpage.
[1] 2018 ONSC 1878 (leave to appeal denied at 2018 ONSC 5225) (“Rooney”).
[2] Business Corporations Act, RSO 1990, c B.16 s. 248.
[3] Rooney, supra note 1 at paras 69-74.
[4] BCE Inc. v. 1976 Debentureholders, 2008 SCC 69 at para 68 (BCE Inc.).
[5] Class Proceedings Act, 1992, SO 1992, c 6, s. 5.
[6] Rooney, supra note 1 at paras 65-68.
[7] Rooney, supra note 1 at para 68.
[8] Rooney, supra note 1 at paras 69-74.
[9] Rooney, supra note 1 at paras 61-62, 71 -72.
[10] at para 62
[11] BCE Inc., supra note 4, at para 70,
[12] Ford Motor Company of Canada, Ltd. v. Ontario Municipal Employees Retirement Board, 2006 CanLII 15 (ON CA) at paras 65-66.
[13] Ibid at para 66.
[14] Rooney, supra note 1 at para
[15] Rooney v ArcelorMittal, 2018 ONSC 5225 at para 10