June 2010 - Billington Barristers successfully concludes Shareholder Oppression Action and In Camera Investigation

Billington Barristers was retained by a director and shareholder of a private corporation who was concerned that a fellow director/shareholder was misappropriating funds. A deadlock between the only two directors and shareholders would have crippled the business. Billington Barristers developed a strategy to obtain a court ordered independent forensic accounting of the corporation’s affairs, and to do so on an in camera (not on the public record) basis. Simultaneously, we obtained an injunction to remove the suspect director from any authority within the corporation. Although the by-laws of the corporation did not make accommodation for the forced removal of a director/shareholder, the judicial process was utilized to obtain such a remedy. The results of the forensic examination enabled Billington Barristers to develop a mechanism to force the valuation and sale of the other shareholder’s interest. Once that was in place, the parties then participated in a Judicial Dispute Resolution (a court supervised mediation process) which resulted in an agreement to address the misappropriation issue and the sale of the shares of the defendant director and shareholder.

Although conducted under a filed court action, most of the steps in the litigation were kept off of the public record, saving the corporation and both directors from public scrutiny of the internal affairs of the business. Richard Billington, Q.C. stated:

Canadian law permits procedures to safeguard the interests of shareholders and other directly interested parties when there is a suspicion that the affairs of a corporation are being conducted in an oppressive, prejudicial or fraudulent manner. Because the concerns are important yet still unproven, the court will take care to ensure that the true circumstances are discovered, but on an in camera basis so that reputations and business sensitivities are protected until the facts are fully established. The results of this independent forensic process are recognized as prima facie proof of the facts, which allows the court to come to a conclusion about the affairs of the corporation much quicker than in normal commercial litigation.

The action was conducted by Richard N. Billington, Q.C. and Monique Morin on behalf of the corporation and director who filed the complaint.