November 8, 2010 decision in Jellema v. American Bullion Minerals Ltd. the Court of Appeal for British Columbia decided that shareholder oppression claims can be certified as class proceedings. This fundamentally changes the shareholder dispute landscape in British Columbia, for both shareholders and the closely held and publicly traded corporations whose shares they own.

American Bullion Minerals owned an interest in a mining property. In 2006 its majority shareholder bankrupted it. In 2008 two minority shareholders persuaded the Supreme Court of British Columbia to annul the bankruptcy, on the ground that the majority shareholder had bankrupted the corporation for the improper purpose of acquiring its interest in the property for less than it was worth. In 2009 the minority shareholders began a shareholder oppression claim against American Bullion Minerals and others, seeking (among other things) an order requiring the corporation, or its majority shareholder, to buy their shares at their fair value, to be determined by the court. The plaintiffs applied to have that claim certified as a class proceeding.

On November 27, 2009 the Supreme Court of British Columbia dismissed the application, on the ground that a claim cannot be certified under the Class Proceedings Act where it can be made in a representative capacity under another statute, and an oppression claim could be made in such a capacity under the Business Corporations Act.

The Court of Appeal disagreed. The court concluded that an oppression claim could not be brought in a representative capacity under the Business Corporations Act. It therefore could be certified as a class proceeding.

This decision fundamentally changes the British Columbia shareholder dispute resolution landscape. Corporations, both closely held and publicly traded, must now recognize in their dealings with the interests of corporate stakeholders that they may be subject to oppression claims even if the effects of their actions on individual stakeholders are small. Under the Class Proceedings Act, these claims can now be aggregated across all affected stakeholders. Class counsel can now bind all affected stakeholders to a contingency fee agreement. Representative claimants now also have the benefit of the “no-costs” regime provided for under the Class Proceedings Act. The representative claimants do not have to pay the defendants any assessed costs of an unsuccessful certification application, nor an unsuccessful trial of common issues in the class proceeding or an appeal from it (absent litigation misconduct). These factors change the economic incentives for representative claimants and class counsel, and make oppression claims more likely.

Similarly, corporate stakeholders, who might not have considered it feasible to seek relief for oppressive conduct, may now find that certification under the Class Proceedings Act allows them to pursue such claims.

type Shareholder Oppression Class Proceedings