“Section 249(4) of the OBCA states as follows:
In an application made or an action brought or intervened in under this Part, the court may at any time order the corporation or its affiliate to pay to the complainant interim costs, including reasonable legal fees and disbursements, for which interim costs the complainant may be held accountable to the corporation or its affiliate upon final disposition of the application or action.
In Alles v. Maurice, 1992 CarswellOnt 132 (Ont. Gen. Div.), Blair, J., as he then was, articulated the test a shareholder must meet in order to obtain an interim costs order:
i. There is a case of sufficient merit to warrant pursuit; and
ii. The complainant shareholder is genuinely infinancial circumstances which, but for an order under s. 249(4), would preclude the claim from being pursued: para 9.
As set out in Hames v. Greenberg, 2014 ONSC 245 (S.C.J.), the Alles test is a low bar to meet and does not require the complainant shareholder to make out a prima facie case of oppression. Rather, a judge must be “satisfied that the claims advanced are well over the “frivolous and vexatious” marker – after all, money is being asked for – but without the need of establishing a claim on a balance of probabilities: para 22.
The first stage of the test may be satisfied even where the parties have put forward conflicting evidence on the merits of the oppression claim. The question is simply whether the complainant shareholder has established a case of sufficient merit to warrant pursuit: Alles, at para 19; Hames, at paras 37-38 and 43; Giffin v. Sootiens, 2010 NSSC 438 (CanLII) at paras 44-45.
The complainant shareholder must lack the financial resources to fund the litigation in order for interim costs to be awarded. However, impecuniosity is not a pre-condition to obtaining an order. A complainant shareholder is not required to sell his/her home, de-register RRSPs, or unreasonably reduce his/her standard of living in order to fund the litigation. Further, a complainant shareholder may qualify for interim costs because he/she is unable to fund litigation for the reason that his/her financial resources are tied up in the company that is the subject of the litigation: Alles, at para 19, Giffin, at paras 31, 34-37, 58 and 63.
In Hames, the court awarded interim costs to a complainant even though he had approximately $300,000 in assets, some of which were RRIFs. The complainant had not made any efforts to borrow money or mortgage his property to fund the litigation, but the court concluded that it was doubtful that he had the ability to raise the funds being requested on the motion. The applicant was elderly, did not have employment income, and had previously drawn down a line of credit. His legal fees were an obstacle to him bringing forward his meritorious oppression claim, so an award of interim costs was warranted: Hames, para 62-85.
When granting an order for interim costs, the Court is to consider the value of the complainant shareholder’s shares. In other words, the Court may consider the fact that, should the complainant shareholder fail to make out his/her case, the amount of interim costs awarded could be applied against the value of the complainant shareholder’s shareholdings: Hames, at para. 77.