Disabled employees can’t be ‘complainants’

Can’t use corporate oppression remedy to get shares other employees received

For the second time, some disabled employees of a pulp-and-paper mill have lost their bid to get shares available for free to all other employees.

The employees worked for Spruce Falls Paper in Ontario. The mill was owned by Kimberley-Clark and the New York Times corporation, and when the 1990 recession hit, they wanted to make deep cuts.

Concerned that this would cause massive job loss and possibly destroy their community, the employees and other community members struck a deal to buy the company’s shares.

Part of the deal was that Spruce Falls employees would receive restricted voting special shares. However, after discussions with employee committees, the CEOs of Kimberley-Clark and the Times determined that employees who had been on worker’s compensation or long-term disability for more than a year would not be entitled to the special shares.

The employees brought a class action, using the oppression section of the Ontario Business Corporations Act.

That section says that a “complainant” can apply to a court for relief from corporate acts or omissions that are “oppressive or unfairly prejudicial.”

The act defines “complainant” to include a registered holder or beneficial owner of shares in the company or “any other person who, in the discretion of the court, is a proper person to make an application.”

But Justice Peter Cumming of the Ontario Superior Court has ruled that the disabled employees are not “complainants” under the Business Corporations Act. They are not even “beneficial owners” of the shares because they have no legal entitlement to them.

“Their expectations arose solely out of their relationship with Spruce Falls Paper as employees and not through any interests as security holders...

“The oppression remedy cannot be employed to redress the disappointed expectations of employees...

“The oppression remedy does not protect expectations which do not relate to a person’s interest as a shareholder in a corporation.”

On that basis, Justice Cumming has shut down the lawsuit without allowing it to go to a full trial.

For more information:

Jonca v. Spruce Falls Power & Paper Co., 48 Ontario Reports (3d) 179 (Ont. Sup. Ct.), May 15/00.

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