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On February 25, 2022, the British Columbia Court of Appeal issued reasons for judgment in Brockman v. Valmont Industries Holland BV, 2022 BCCA 80 (“Brockman”).
This case provides important clarification about how the two-year limitation period applies to a shareholder’s claim in oppression where the oppressive conduct is continuous and ongoing. The Court of Appeal clarified that a limitation period begins to run when the prospective claimant has discovered the wrongful conduct, and not when that conduct ceases.
The Limitations Act, SBC 2012, c 13 (the “Limitation Act”), states that most claims have a basic two-year limitation period to be filed. This means, if a claim is not properly filed within the two-year period, the prospective claimant may not be able to recover their losses. This two-year period ordinarily starts from the date the prospective claimant has discovered the wrongful conduct.
However, some situations are more complex and the conduct giving rise to the claim is not so discrete. So, when does the two-year limitation period start for wrongful conduct that began years ago and is presently on-going? The Court in Brockman answers this question and provides clarity as to when the limitation period clock starts.
The claimant, Mr. Brockman, indirectly through his holdings company holds 20% of the shares in Valmont West Coast Engineering Ltd. (“VWCE”). VWCE is a leading company in the Canadian utility market.
In 2008, Valmont Industries Inc. (“Valmont Industries”), the respondent, indirectly acquired a majority interest in VWCE through one its subsidiary companies. Valmont Industries eventually came to own 80% of VWCE making it both the parent company of VWCE and its majority shareholder.
Mr. Brockman claims that since 2008, Valmont Industries has exercised its control over VWCE and directed VWCE not to bid in the Canadian utility market in which it operated, thereby allegedly depressing VWCE’s share price. Then in 2018, Valmont Industries exercised its option to buy out Mr. Brockman’s shares of VWCE at this lower value, which Mr. Brockman claims gave rise to a claim.
The primary question before the Court was: has the two-year limitation period expired on this claim making it statue-barred or does the on-going nature of the conduct refresh the clock? In short, the answer is that a limitation period begins to run when the cause of action arises (i.e., when the wrongful conduct is discovered), and not when the conduct is remedied or concluded.
On December 31, 2018, Mr. Brockman filed a petition seeking relief from the oppressive conduct of Valmont Industries pursuant to section 227 of British Columbia’s Business Corporations Act, SBC 2002, c 57. Mr. Brockman alleged that Valmont Industries, as VWCE’s parent company, engaged in oppressive or unfairly prejudicial conduct towards its subsidiary for over 10 years.
The trial judge agreed with Mr. Brockman’s claims and held that Valmont Industries did not allow VWCE to operate as a going concern and thereby affected VWCE’s ability to compete and grow within its market. The trial judge held that Mr. Brockman’s claim was not statute-barred by operation of the Limitation Act because the oppressive behaviour was an ongoing and continuing course of conduct, as opposed to multiple discrete acts.
Valmont Industries disagreed with the trial judge and believed the Court erred in concluding the oppressive conduct had not triggered the running of a limitation period. Valmont Industries appealed the decision.
In its decision, the Court of Appeal examined the wording of section 6(1) and section 8 of the current Limitation Act. Section 6(1) reads “Subject to this Act, a court proceeding in respect of a claim must not be commenced more than 2 years after the day on which the claim is discovered”. Section 8, of the Limitations Act, further clarifies the element of discoverability by holding:
“… a claim is discovered by a person on the first day on which the person knew or reasonably ought to have known all of the following:
The Court of Appeal held, from its examination of the legislation, that the wording of the statute indicates that the limitation period begins to run when the action is discovered, not when it is remedied or concluded. Meaning, even if the injurious conduct is continuous or ongoing in nature, the limitation period clock is triggered when the conduct is discovered.
In Brockman, the Court of Appeal held that “oppression, even if it is ongoing, has a starting point; at some juncture, a pattern of conduct becomes oppression”. The Court held that Mr. Brockman could not claim his damages from 2008 to 2016 because the two-year limitation period on those damages had lapsed. However, Mr. Brockman could recover his damages from the last two-years as the limitation period has yet to bar those claims.
In allowing the appeal, the Court of Appeal provided clarification on how the two-year limitation period applies to a shareholder’s claim in oppression where the oppressive conduct is continuous and ongoing. As a result of this decision, any person who feels they have a claim under section 227 of the Business Corporations Act due to unfairly prejudicial conduct should act promptly to file their claim as soon as is practicable.
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Our goal is to provide straightforward, cost-effective commercial dispute resolution strategies consistent with our clients’ overall business objectives and long-term best interests.
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