The recent decision from the BC Court of Appeal, Cepuran v. Carlton, 2022 BCCA 76, significantly changes how we devise litigation strategies to resolve a shareholder dispute.
In Cepuran, the court decreased the likelihood that a respondent could engage in a tactic that could prolong an oppression proceeding. In most cases, this removes a tactic previously available to a dominant shareholder traditionally subject to an oppression proceeding.
To understand the impact of Ceupran, one must understand that a shareholder starts an oppression proceeding in BC by filing a petition. Compared to an action (a proceeding ending in a trial), petitions do not engage the typical fact-finding processes. Petitions do not require the parties to conduct examinations for discovery, document exchange, or the other extensive means by which facts and law are determined in a full trial. Consequently, a shareholder (usually a minority shareholder) could start an oppression proceeding quickly. In the strictest sense, from when a shareholder files a petition, in theory, a hearing would be scheduled mere weeks after a complaint is made.
In contrast, a trial date in an action can only be scheduled after pleadings are closed. Many counsel will not schedule a trial date until after conducting examinations or completing document exchanges. Moreover, assuming the hearing takes more than two to three days, it may be years, if not months, for a trial to be scheduled after the plaintiff files a notice of civil claim.
Consequently, due to the delays inherent in proceeding by action, it was common for a clever respondent’s counsel (especially where the respondent has resources available) to apply to convert the petition into an action. Before Cepuran, the legal test to convert a petition into an action was very low and often very quickly met. One needed only to prove the existence of a triable issue. In converting the petition into an action, a respondent could deny a petitioner a quick resolution, turning a shareholder dispute that could be resolved in weeks and months into one that would take quarters and years to resolve. In business, time pressure and time costs weigh heavily against a complaining shareholder.
In Cepuran, the Court of Appeal held that the rules could be interpreted such that chambers judges (judges who heard those applications for oppression proceedings) could order various techniques needed to resolve differences of fact or law on a custom basis. For example, chambers judges could order limited cross-examination and affidavits, examinations for discovery, or document production as justice required to ensure full adjudication of matters within the context of an expedited proceeding the petition process is intended to be.
The consequence of Cepuran is that clients can no longer defend a petition by delaying proceedings with this tactic. For clients that are considering bringing an oppression petition, the remedy is now more viable.
We believe Cepuran will increase oppression proceedings brought in shareholder disputes. Petitioners can now resolve their corporate complaints, usually minority shareholders complaining about how dominant shareholders treat them, more quickly and cheaply. For dominant shareholders, we caution shareholders from engaging in oppressive conduct merely because it would be uneconomic for an oppressed shareholder to complain. That rationale no longer has the same strength as it may have had before Cepuran. For counsel, Cepuran illustrates that procedural law matters. What might have been seen as an innocuous change to practice, billed as a change to improve access to justice, significantly impacts the strategic advice counsel gives.
If you'd like to contact me to arrange a lunch and learn for your firm about the latest cases that may impact your clients, please send an email to chilwin@ascendionlaw.com.
