Court of Appeal for Ontario
Date: 2023-08-03 Docket: C70757
Before: Fairburn A.C.J.O., Thorburn and Coroza JJ.A.
Between:
Bertha Aiello, Floriri Village Investments Inc. and the Bleta Family Trust Plaintiffs (Respondents)
And:
Leroy Bleta, Niazi Holdings Incorporated and Korce Group Ltd. Defendants (Appellants)
Counsel: David M. Lobl and Kira Domratchev, for the appellants Elaine Peritz and A. Sean Graham, for the respondents
Heard: May 24, 2023
On appeal from the order of Justice Cory A. Gilmore of the Superior Court of Justice, dated May 13, 2022, with reasons reported at 2022 ONSC 2798
A. OVERVIEW
1This appeal concerns a dispute between two siblings, the appellant, LeRoy Bleta, and the respondent Bertha Aiello over companies bequeathed to them and other family members by their late father, Karafil Bleta (the “Deceased”). The Deceased owned three companies: Floriri Village Investments Inc. (“Floriri”), Niazi Holdings Inc. (“Niazi”), and Korce Group Ltd. (“Korce”).
2After the death of their father, the relationship between Bleta and Aiello deteriorated but their business interests remained intertwined.
3In the Fall of 2014, they reached an agreement. The central question before the trial judge was what the terms of that agreement were.
4The appellants claimed there was no agreement as to ownership of the companies; theirs was only a temporary division of management responsibilities. The respondents claimed that: (i) there was an agreement as to ownership of the companies, such that Aiello would obtain exclusive ownership of Floriri; (ii) Bleta breached the terms of the agreement and his fiduciary duty to Aiello; and (iii) Bleta was unjustly enriched at Aiello’s expense.
5At trial, Aiello sought a declaration that she was the beneficial owner of Bleta’s shares in Floriri, which consisted of 16 common shares. She sought an order enabling her to purchase Bleta’s interest in Floriri in exchange for the transfer to Bleta of Aiello’s interest in the Bleta Family Trust (“BFT”). The BFT was an inter vivos trust established by the Deceased which owns all common shares of Niazi which in turn owns 90% of the common shares of Korce. She also sought an order that the action regarding the disposition of the intercorporate loans among the respective companies (the “Loans Action”) be expedited, and that upon disposition of that action, she be given the right to seek an order for specific performance for the transfer of Bleta’s shares in Floriri with an equalization payment in according with the accounting done in December 2014.
6The trial judge granted judgment in favour of Aiello and the other respondents. She held that the parties agreed that Aiello would own and manage the Floriri company, while the appellant Bleta would own and manage the Niazi and Korce properties. She further held that the respondent Aiello was vulnerable to Bleta, he owed her a fiduciary duty, and was unjustly enriched at her expense.
7The trial judge issued a declaration that the respondent Aiello was the beneficial owner of Bleta’s common shares in Floriri, that the companion Loans Action regarding the intercorporate loans should proceed on an expedited basis, and that upon completion of the Loans Action, the respondent Aiello could seek an order for specific performance that Bleta transfer his common shares in Floriri to her, with an equalization payment, in accordance with the accounting as at December 1, 2014. Lastly, she held that the respondents’ promissory estoppel claim was valid and was not statute-barred.
8The appellants claim the trial judge erred in finding that:
a) there was an agreement as to ownership of the companies, and Bleta was unjustly enriched at Aiello’s expense;
b) Bleta was in a fiduciary relationship with Aiello which duty he breached; and
c) the requisite elements of promissory estoppel were met, and the claim was not statute-barred.
9For the reasons that follow, I would dismiss the appeal.
B. ANALYSIS OF THE ISSUES RAISED ON APPEAL
10The standard of review applied to findings of fact and mixed fact and law is palpable and overriding error. The standard to be applied where there is an error in respect of the legal test to be applied is correctness: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at paras. 10, 18, 25, 32 and 36-37; Waxman v. Waxman, 44 B.L.R. (3d) 165, 186 O.A.C. 201 (C.A.), at paras. 292-297, 359-360, leave to appeal refused, [2004] S.C.C.A. No. 291.
The First Issue: Was there an Agreement as to Ownership of Floriri and was Bleta Unjustly Enriched at Aiello’s Expense?
11The appellants submit that the trial judge erred in holding that the agreement between the parties was an agreement as to ownership of the companies. The appellants concede that their submission that Bleta was not unjustly enriched, “stands or falls based on the question of whether the Alleged Contract was reached”.
12The appellants submit that following Bleta’s accusation that Aiello misappropriated funds (which she denies), the parties attempted to negotiate a split of management. They met with a third party to discuss valuations and inspection of the properties, and a valuation report was provided on December 5, 2014.
13On December 11, 2014, Bleta emailed the third party to advise that the siblings were “switching to sole management effective Friday. [Aiello] will confirm her choice.” Bleta (who is a lawyer by profession) then prepared resolutions wherein Bleta became a director of Niazi, and Aiello a director of Floriri. Aiello also signed an agreement resigning as a trustee of the BFT (“the Renunciation Agreement”). The Renunciation Agreement made no reference to Floriri.
14The appellant Bleta concedes that he “took positions that can certainly be interpreted as him saying that there was an agreement reached”. The appellants submit, however, that the Renunciation Agreement (whereby Aiello resigned as a trustee of the BFT) and the behaviour of the parties demonstrate that there was no agreement as to significant terms. At most, they claim, it was no more than “an agreement to agree”. Some of the significant terms in dispute include what to do about the intercorporate loans, the amount of the equalization payment, to whom it was owed, and the mechanism for calculation of payments. The appellants note that in November 2015, Aiello wrote to Bleta to advise that she “cannot accept” the valuations of a subset of properties owned by Floriri and that Aiello disputed the equalization payment set out in the Draft Share Transfer Agreement delivered on January 30, 2016, although she took the position that she was already the owner of Floriri.
15The appellants further claim that the conduct considered by the trial judge in support of her finding that there was an ownership agreement was conduct after the Renunciation Agreement was signed and that, in any event, Aiello’s conduct in some instances was inconsistent with her resignation from the BFT in 2014.
16The trial judge addressed these issues in her reasons and found as a fact that Aiello and Bleta agreed that Bleta would release his interest in his 16 common shares of Floriri and in return, she would relinquish her interest in the BFT and Bleta would retain all shares of the BFT.
17Factual findings are subject to deference and there is evidence to support these findings as further set out below.
18First, the parties were in an acrimonious relationship and were trying to resolve their differences by separating their affairs. To that end, the Renunciation Agreement drafted by Bleta and signed by Aiello provides that,
I [Aiello]…hereby tender my resignation as Trustee of the [BFT], to take effect immediately.
I further agree that I am not entitled to any further benefit, involvement, or accounting and that my interest in the trust is extinguished.
19Aiello has never been reinstated nor does the agreement provide that this was a temporary arrangement. In any event, as noted by the trial judge, neither the Trustee Act, R.S.O. 1990, c. T.23, nor the BFT permits the temporary resignation of a trustee.
20This is consistent with Aiello’s position that she renounced her ownership interest in the BFT in exchange for her ownership interest in Floriri. (In addition, contrary to the appellants’ submissions, the trial judge made no order concerning the preference shares held in trust for the siblings’ mother until her death in 2020, nor was there any evidence referred to in the trial judge’s reasons that the issue of the preference shares factored into the parties’ decision in 2014 regarding the ownership and/or management of the corporations.)
21Second, contrary to the appellants’ assertion, Aiello did not disagree with the equalization amount when she was provided with the Draft Share Transfer Agreement; rather, she asserted that the outstanding loans to Floriri be paid prior to the determination of the equalization amount (with the matter of the loan claims to be determined in the Loan Action).
22Third, for seven years after signing the Renunciation Agreement, Bleta and Aiello had “unimpeded management and control over all aspects of the parties’ respective holdings. Neither accounted to the other for any of their actions or decisions in relation to their respective holdings after 2014.” The trial judge held that,
Mr. Bleta acted as if his sister’s resignation was permanent. He sold the Niazi properties on Runnymede Road, Pacific Avenue and Castleton Avenue without any consultation or accounting to his sister. He managed the Niazi and Korce properties after the fall of 2014 without consulting with his sister. Indeed, he gave authority to his daughter and his wife as signing officers for Niazi to sign sale documents for the properties. Further, he refused to assist his sister with re-financing Floriri’s mortgage with TD Bank when it became due in August 2015. He told the bank that he would no longer guarantee the Floriri mortgage and that he had not been operating Floriri since December 2014. It is hard to view this as a “temporary” arrangement when Mr. Bleta’s actions were those of an owner who had withdrawn from Floriri and was acting unilaterally in relation to the BFT. After December 2014, he never treated his sister as either trustee or beneficiary of the BFT.
23Fourth, the trial judge accepted Bertha’s evidence that while the Renunciation Agreement makes no reference to Floriri common shares, she did not relinquish her interest in the BFT “for free”. She noted at para. 202 of her reasons that,
Equitable principles presume that no gift was intended (see Pecore v. Pecore, 2007 SCC 17). As [Aiello] said many times at trial, her brother cannot have it both ways. He cannot assume unilateral control over the BFT without completing his end of the bargain which was to transfer his shares in Floriri to his sister. Her reasonable expectation was that the Renunciation was a binding and enforceable agreement with only the calculation of the equalization payment outstanding. Both parties conducted themselves in a manner consistent with them viewing themselves as bound.
24There was a formula for equalization, but the trial judge decided it would be unfair to force Bleta to repay the equalization as, “[a]ny loan repayment would be subject to an adjustment in relation to an equalization payment.”
25Fifth, at para. 215 of her decision, she held that there were no essential terms missing:
Mr. Bleta insists that the parties’ conduct is of minimal importance because they had not signed essential documents necessary to finalize the division of ownership. I do not agree. One signed document such as the Renunciation in this case, can be sufficient so long as the parties’ intentions can be ascertained as to any further terms of the agreement. In Prolink Broker Network Inc. v. Jaitley, 2013 ONSC 4497, the only document signed was a letter of intent. The Defendant argued that the letter of intent was not binding because the parties never signed a further written document. The Court found that “the fact that a formal written document has been prepared but not signed does not alter the binding character of the agreement”: at para. 41.
26The trial judge accepted that the parties knew the properties in question, they obtained valuations of the holdings of the three companies with the intention that an equalization payment be calculated as of December 1, 2014, and Aiello signed the Renunciation Agreement based on Bleta’s assurance that this document was needed for a division of ownership. She further found that the conduct of both parties following the signing of the Renunciation Agreement over a period of seven years, including unimpeded management and control over all aspects of the parties’ respective holdings, was consistent with a binding agreement dividing ownership. Only the equalization payment remained outstanding, and the parties engaged in valuations and accounting to determine what was owed: see, e.g., Prolink, at paras. 41-42; Ruparell v. J. H. Cochrane Investments Inc. et al., 2020 ONSC 7466, aff’d 2021 ONCA 880.
27As noted above, the appellants concede that their submission that Bleta was not unjustly enriched, “stands or falls based on the question of whether the Alleged Contract was reached”. Moreover, as noted by the trial judge at para. 236 of her decision,
Ms. Aiello has clearly relied on her brother’s promise that in relinquishing her rights in the BFT, she would receive ownership of Floriri. If Mr. Bleta is now entitled to a 50% interest in Floriri, Ms. Aiello would be in an inferior position, as the value of Floriri’s properties have skyrocketed due to both market conditions and Ms. Aiello’s personal efforts. There were no recent or even dated appraisals of the Niazi or Korce properties. However, relying on the RentalTO feedback, it would appear they are in worse condition both from a physical and management condition than the Floriri properties. The gap in value between the BFT properties and Floriri has done nothing but widen in the last seven years. To return the parties to their original positions could only benefit Mr. Bleta.
28Since the agreement was breached, the trial judge’s finding of unjust enrichment is upheld. For these reasons, I would dismiss the first ground of appeal.
The Second Issue: Did the Trial Judge err in finding that Bleta breached his Fiduciary Duty to Aiello?
29The appellants claim the trial judge erred in finding that “Bleta took advantage of his sister’s vulnerability and attempted to exercise control by acting in an intimidating manner.” They claim the trial judge erred in law by failing to establish that there was any undertaking, express or implied, that Bleta use any discretionary power he had on Aiello’s behalf.
30The trial judge noted that a fiduciary duty may be found without an express undertaking where the alleged fiduciary (i) had some scope to exercise discretion or power; (ii) could exercise that power unilaterally to the detriment of the other party’s legal or practical interests; and (iii) the other party was vulnerable to the exercise of that power or discretion: Waxman, paras. 511-512, 720; see also Alberta v. Elder Advocates of Alberta Society, 2011 SCC 24, [2011] 2 S.C.R. 261, at paras. 29-36.
31For there to be a fiduciary duty, the existence of a fiduciary undertaking on the part of the alleged fiduciary remains a necessary condition: Galambos v. Perez, 2009 SCC 48, [2009] 3 S.C.R. 247, at para. 75. “This does not mean, however, that an express undertaking is required. Rather, the fiduciary’s undertaking may be implied in the particular circumstances of the parties’ relationship”: Galambos, at para. 79.
32While she did not specifically refer to the Elder decision, I see no error in the trial judge’s articulation of the test. Nor do I see any palpable and overriding error in her findings of fact on this point.
33The relationship between the siblings was such that there was an implied understanding that Bleta would act in accordance with his duty of loyalty to his sister.
34As noted by the trial judge at para. 187 of her reasons, both Bleta and Aiello conceded that they trusted each other. The trial judge accepted Aiello’s testimony that she trusted Bleta because of his superior position in the family business and the fact that he was a lawyer. The trial judge also accepted that she took unquestioning direction from him upon her father’s death just as she had done with her father when he was alive (notwithstanding that she had worked in the family business for some time). Moreover, Bleta had scope to exercise his discretion as he drafted, inter alia, the corporate resolutions of December 2014, the Renunciation Agreement and the Draft Share Transfer Agreement that delineated Aiello’s rights and obligations.
35The trial judge further found that Bleta knew Aiello was vulnerable and that although he said he encouraged her to obtain independent legal counsel, he would not allow her access to company funds to pay a lawyer knowing she could not pay for counsel on her management salary, and he attempted to exercise emotional control over her.
36The trial judge articulated instances where she found Aiello’s vulnerability was exploited such as the following:
Mr. Bleta was not forthright with his sister about the status of the loans owed to Floriri. While he did not disagree that they were outstanding, he thought they should be “forgiven” because Floriri had more value than the BFT companies. He insisted that his sister pay him an equalization payment knowing that the loans owed to Floriri from the BFT companies far exceeded the amount of the equalization payment. [Emphasis added.]
I find that he was … attempting to take advantage of what was already a one-sided situation. His sister had already given up all of her rights to the BFT which he did not view as temporary until it was to his advantage to do so. He used the fact of the Renunciation as a means to attempt to force his sister to forgive the loans owed to Floriri before he would transfer the shares to her. He then protested that his sister was not cooperating with him to complete the transaction they had agreed upon.
37Mindful of the deference owed to the trial judge’s findings of fact, I see no basis to interfere with her determination that Bleta breached his fiduciary duty to Aiello. For these reasons, I would dismiss this second ground of appeal.
The Third Issue: Was the Claim for Proprietary Estoppel Valid and if so, was it Statute-Barred?
38The appellants correctly note that a promissory estoppel claim cannot be used as the basis of a cause of action to enforce a promise as it is to be used as a shield not a means to establish contractual rights in the absence of an agreement: Combe v. Combe, [1951] 2 KB 215 (E.W.C.A.); Cowper-Smith v. Morgan, 2017 SCC 61, [2017] 2 S.C.R. 754, at para. 23. In any event, contrary to the trial judge’s finding, this claim is statute-barred as it was added by amendment years after the expiration of the limitation period and was only allowed to proceed subject to Bleta’s limitations defence. Moreover, the additional reference referred to by the trial judge (that the property at 8 Castleton was sold without Aiello’s consent and Korce had insufficient funds to pay its debts) does not go to the heart of the claim.
39However, the dismissal of this claim does not affect the outcome. The trial judge’s conclusion that there was an agreement as to ownership between Bleta and Aiello and that Bleta was unjustly enriched upon his breach of the agreement is dispositive of the appeal and sufficient to sustain the claim and the relief granted.
C. DISPOSITION
40The trial judge made no palpable and overriding error in finding that there was an agreement as to ownership of the companies and that the appellant was unjustly enriched by virtue of his breach of the agreement. There was ample evidence upon which she could so find. Nor did she err in articulating the test to establish a fiduciary duty or make any palpable and overriding error in finding that Bleta owed and breached his fiduciary duty to Aiello.
41I would therefore dismiss the appeal. On the agreement of both parties, costs to the respondents in the amount of $50,000 all inclusive.
Released: August 3, 2023
“J.M.F” “Thorburn J.A.” “I agree. Fairburn A.C.J.O” “I agree. S. Coroza J.A.”
