Oppressive Definition:

A standard for judicial review of the actions of a corporation towards shareholders. In Scottish Co-operative Wholesale Society Ltd. v Meyer, Justice Simonds described oppressive in the context of corporate conduct as:

"Burdensome, harsh and wrongful to the other members of the company or some of them, and lacks the degree of probity which they are entitled to expect in the conduct of the company's affairs."

In Re Chiung, Justice Gill of the Malayian court used these words:

"Looking at the circumstances as a whole, I do not see how I can resist the conclusion that there has been a lack of probity and fair dealing in the affairs of the company. I have therefore come to the conclusion that the affairs of the company are being conducted in a manner oppressive to one or more of its members."

In Fox v 7L Bar Ranch, Justice Sheehy of the Supreme Court of Montana adopted these words:

"Many courts hold that the term oppression suggests harsh, dishonest or wrongful conduct and a visible departure from the standards of fair-dealing which inure to the benefit of majority and to the detriment of the minority.

"Some courts find it helpful to analyze the situation in terms of the fiduciary duty of good faith and fair dealing owed by majority shareholders to the minority.

"Generally, it is agreed that courts will proceed on a case-by-case basis.

"Oppression may be more easily found in a close-held, family corporation than in a larger, public corporation. The reason for such a rule is obvious. Shares in a closely held corporation are not offered for public sale. Without readily available recourse to the market place, a dissatisfied shareholder is left with severely limited alternatives if one group of shareholders chooses to exercise leverage and squeeze the dissenter out."

In the Superior Court of New Jersey, Justice Haines had occasion, in Exadaktilos v. Cinnaminson Realty, to write:

"Oppressive ... does not carry an essential inference of imminent disaster; it can contemplate a continuing course of conduct.

"The word does not necessarily savor of fraud, and the absence of mismanagement, or misapplication of assets, does not prevent a finding that the conduct of the dominant directors or officers has been oppressive. It is not synonymous with illegal and fraudulent.

"Corporate decisions within the business judgment rule cannot be made the basis of an oppression claim.... The business judgment rule instructs that a decision made by a board of directors pertaining to the manner in which corporate affairs are to be conducted should not be tampered with by the judiciary so long as the decision is one within the power delegated to the directors and there is no showing of bad faith....

"It has been held that oppressive means a visible departure from the standards of fair dealing, and a violation of fair play on which every shareholder who entrusts his money to a company is entitled to rely. It has also been held to mean a lack of probity and fair dealing in the affairs of a company to the prejudice of some of its members."

REFERENCES:

• Exadaktilos v. Cinnaminson Realty Co. Inc., 400 A. 2d 554 (1979)
• Fox v. 7L Bar Ranch Co., 645 P. 2d 929 (1982). Extract has been slightly re-ordered to enhance readability.
• Re Chi Liung & Sons Ltd.,  [1963] MLJ 97
• Scottish Co-operative Wholesale Society Ltd. v Meyer, [1959] A.C. 324