A British Columbia Court of Appeal ruling has clarified when terminated employees can seek compensation through corporate oppression claims, emphasizing that employment-related losses must stem from shareholder expectations rather than employee status.
The case involved brothers F.G. Jr. and T.G., who co-founded Cedar Products Ltd., a door manufacturing company, in 1985 with their parents’ financial backing. After 30 years of working together, their relationship deteriorated, leading T.G. to terminate F.G.’s employment in August 2015 and exclude him from company premises and information.
F.G. and his company launched an oppression claim under section 227 of the Business Corporations Act, arguing that T.G.’s conduct violated his reasonable expectations as a shareholder.
Court finds oppressive conduct
The trial judge found the respondents had engaged in oppressive and unfairly prejudicial conduct. The judge accepted F.G.’s reasonable expectations that he would be a 50% “partner” sharing equally in company value and profits, and that T.G. would “act in Frank’s best interest and certainly not in a manner hurtful to him.”
The oppressive conduct included terminating F.G.’s employment, excluding him from premises, failing to provide audited financial statements, instructing employees not to share information with him, and delaying payments under a settlement agreement.
However, when it came to remedies, the trial judge ordered only that the company purchase F.G.’s shares, dismissing his claim for 13 months of additional salary compensation.
Employment compensation denied
F.G. argued he should receive compensation for lost wages, claiming he was entitled to 24 months’ salary as would be usual in wrongful dismissal cases. The trial judge rejected this, finding the monthly payments were clearly tied to work performed under a “no work, no pay” arrangement.
The judge concluded F.G. was bringing the wage claim “qua employee not qua shareholder” and dismissed it as having no merit.
On appeal, F.G. challenged this decision, arguing his termination was part of the oppressive conduct and should be compensated under the court’s broad remedial powers.
Legal framework for employment-related oppression claims
The Court of Appeal examined key precedents establishing when employment termination can form part of oppressive conduct warranting compensation.
In Naneff v. Con-Crete Holdings Ltd., a court found dismissal could constitute oppression where the claimant’s “position as employee is integrally intertwined with his interests as a shareholder, officer and director” and the dismissal was part of a pattern designed to exclude the complainant from any active role in the companies.
Similarly, in Elliott v. Opticom Technologies Inc., termination was found unfairly prejudicial where shareholders’ interests “as shareholders and employees were inextricably bound together.”
The Court of Appeal noted that both cases “involved companies that had been structured to tie employment closely to shareholdings, such that the right to be employed flowed from the status of being a shareholder.”
Court upholds employment compensation denial
The Court of Appeal found no error in the trial judge’s refusal to award employment-related compensation. The court noted that while the trial judge initially listed F.G.’s termination among the oppressive conduct alleged, her final findings of oppressive conduct did not specifically include the dismissal or failure to pay additional salary.
The appellate court emphasized that “an oppression action may only be pursued in respect of wrongs that constitute oppressive conduct suffered by the shareholder qua shareholder” and relief should go “no further than necessary to correct or rectify that conduct.”
Importantly, the court found the trial judge had not determined whether T.G.’s dismissal of F.G. was wrongful or justified, noting that “a successful claim in wrongful dismissal as part of a pattern of oppressive conduct is required before it can be remedied.”
Share valuation upheld
F.G. also challenged the trial judge’s valuation of his shares at the midpoint of an expert’s range rather than the high end, and her acceptance of a negative goodwill calculation that reduced the company’s value.
The business valuator had concluded the company’s goodwill ranged from negative $1.37 million to negative $1.11 million, indicating the company “was not able to generate expected market rates of return from its operating assets and possible impairment of the operating assets.”
F.G. argued the negative goodwill shouldn’t be deducted since T.G. would retain control of the business, but the Court of Appeal noted the negative goodwill actually reduced value “to the detriment of Tom as the remaining shareholder, not to the detriment of the appellants.”
The court found no error in accepting the midpoint valuation given uncertainties about future asset sales and the expert’s recommendation that the midpoint be used when “there is uncertainty around the timing of the sale of the property.”
Interest award stands
The Court of Appeal also rejected F.G.’s argument that he should receive compound rather than simple pre-judgment interest on the share purchase price.
While acknowledging courts have equitable jurisdiction to award compound interest in oppression cases, the court found no evidence that F.G. had provided proof of “investments foregone, loans taken, or financial losses resulting from not being paid.”
The appeal was dismissed, with the court finding no reversible errors in the trial judge’s exercise of discretion regarding remedies or share valuation.
For more information, see Gierc Jr. v. Wescon Cedar Products Ltd., 2025 BCCA 239 (CanLII).
