November 11, 2025
We have written a series of articles on the oppression remedy as a flexible and dynamic remedy for closely held Ontario corporations. The oppression remedy responds well in many cases where the controlling party behaves badly. In order to obtain an oppression remedy, you must prove that the conduct has been unfairly prejudicial or unfairly disregards the interests of listed stakeholders.
THE ISSUE
But what happens if you do not have the evidence to prove oppression, or the facts fall short of oppression, but you still believe that there has been misconduct?
THE SHORT ANSWER
The Ontario Business Corporations Act provides for a Superior Court judge, on application, to order an investigation, and to appoint an inspector to look into the corporation’s affair.
Although this is not in itself a remedy, the information obtained may lead to a further proceeding for a remedy.
THE CASE
Sherif Gerges Pharmacy Professional Corporation et al. v. Niam Pharmaceuticals Inc. et al, is a recent case which illustrates the proper approach to the issues.
The parties jointly owned several pharmacies as equal shareholders (directly or indirectly). The individual respondent through another corporation also controlled other pharmacies. His holding company provided operational support (administrative services) to the jointly owned pharmacies as well as those in which the applicant had no interest. There were issues of overstated inventory; the use of the credit of the jointly owned pharmacies to support the respondent’s pharmacies; and donations being made by the jointly owned pharmacies to a foundation related to the individual respondent.
The applicants complain that the respondents are not supplying sufficient information about these related party transactions in spite of earlier court orders.
There were issues about an arbitration clause, and derivative actions, but our focus is on the appointment of the inspector. The judge relied on a 2015 Ontario Court of Appeal case which said that the purpose of appointing an inspector is “… to ensure that a corporation discharges its core obligation to provide shareholders with an accurate picture of its financial position …”
The judge goes onto point out that:
[34] The following is required to appoint an inspector under s. 161 of the OBCA:
(a) the applicant must be a security holder;
(b) there must be a prima facie case that one of the circumstances set out in s. 161(2) of the OBCA has been met; and
(c) the court must consider the appropriateness of the proposed investigation, bearing in mind its usefulness and reasonableness under the circumstances, with due consideration to its expected costs and benefits.
[citations omitted]
And further:
The required evidentiary threshold is low and is satisfied if there is good reason to believe the conduct complained of may have taken place or there at the very least there exists an index of suspicion or appearance that reasonable shareholder expectations have not been met.
The respondents did not dispute that issues existed. They attempted to explain their actions, but the judge found that the existing information did not fully explain the respondents’ actions.
Therefore, the test to appoint an inspector is met:
…recognizing that the remedy is both discretionary and extraordinary, the court has considered the following factors (a) whether the applicant needs access to the information; (b) whether there are better or less expensive means to acquire the information; (c) whether the proposed investigation would give a tactical advantage to ..the applicant; and (d) the expense of the investigation as compared to the benefits …
TAKEAWAYS:
- Appointment of an inspector is both discretionary and extraordinary.
- The role of the inspector is to find facts, rather than determine legal issues.
- Further court proceedings may be required.
- Caution should be taken to follow proper procedures and respect time limits for bringing actions.
- Corporate disputes are often so complex that early legal advice or representation is useful to chose the correct path to resolution.
WHAT WEILERS LLP CAN DO TO HELP YOU
At Weilers LLP, our litigation team understands corporate disputes, the importance of reasonable expectations, and are literally well schooled in remedies (our counsel, Brian Babcock has taught the course on Remedies at the Bora Laskin Faculty of Law). We work closely with our experienced corporate lawyers to sort out the issues as early as possible, to save time and expense, and increase opportunities for recovery. If you find yourself on either end of a corporate dispute, we would be happy to discuss whether we are the right lawyers for you.