Ontario Court of Appeal Upholds Dismissal of Two Proposed Oppression Class Actions

BCE Inc. and its subsidiary Bell Canada International Inc. (BCI), were sued in 2002 by Wilfred Shaw, a BCI shareholder in Kitchener, Ontario, who alleged that the two companies had acted oppressively in the conduct by BCI of a series of transactions (the recapitalization plan) that BCI had initiated in December 2001. BCI ultimately filed in June 2002 for a plan of arrangement leading to a court-supervised dissolution under the administration of Justice James Farley of the Superior Court of Justice. In his lawsuit, Shaw alleged negligent misrepresentation and oppression by both defendants, and sought $1 billion on behalf of all of BCI’s former minority shareholders as of the date of the announcement of the recapitalization plan.

In May 2003, Shaw moved for certification of his lawsuit as a class action, and the defendant corporations moved to dismiss the lawsuit as disclosing no reasonable cause of action. For reasons released May 14, 2003, Justice Farley refused to certify the lawsuit as a class action, finding that the plaintiff had failed to establish any of the five criteria for certification. In addition, the judge struck out the statement of claim and dismissed the action, with costs, as failing to plead the essential elements of negligent misrepresentation, and as failing to advance a proper case in oppression. The Court granted Shaw leave to amend, but explicitly warned him that any attempt to do so would have to be a fundamentally different pleading.

In July 2003, Shaw filed an amended claim against the same defendants, again as a proposed class action and again alleging oppression, but abandoning the claim in misrepresentation. In August, another BCI minority shareholder, Cameron Gillespie, represented by the same counsel, filed an identically worded claim against BCE and BCI, also as a proposed class action.

In November 2003, the defendants moved to dismiss Shaw’s amended claim, and Gillespie’s identical claim. For reasons dated December 31, 2003, Justice Farley dismissed both actions. The court concluded that the claims pleaded no reasonable cause of action in oppression, in part because the recapitalization plan documents relied upon by the plaintiffs to ground their claims indicated that the transactions in fact conferred a benefit upon the minority (non-BCE) shareholders. In addition, the court found that the claims were estopped by the doctrines of issue estoppel and abuse of process: the judge stated that the plaintiffs’ attempt to re-plead their action was, in the court’s phrase, simply the same old wine in the same old bottles.
Finally, the Court additionally concluded that the Shaw claim could not properly be advanced as a proposed class action, given the adverse conclusion in Justice Farley’s first reasons as to his suitability as a representative plaintiff. Costs were again awarded to the defendants. Leave to amend was refused to both plaintiffs.

In July 2004, the appeal from the two dismissals was heard by the Court of Appeal, and for reasons dated July 23, the appeals were dismissed. The court ruled that neither claim disclosed a reasonable cause of action, adopting the rationale of Justice Farley. Costs were awarded against each plaintiff/appellant in the amount of $25,000.

BCE was represented by in-house counsel Patricia Olah in Montreal; and by F. Paul Morrison, Dana M. Peebles and W. Grant Worden of McCarthy Tétrault. BCI was represented by in-house counsel Keith Flavell; and by Alan Mark, Kelly Friedman and Steve Tenai of Ogilvy Renault. The plaintiffs were represented by John McDonald of McDonald Ross in Cambridge, and John Findlay of Findlay McCarthy.