Court of Appeal for Ontario
DATE: 20231012 DOCKET: C70331
Gillese, Benotto and Copeland JJ.A.
A proceeding under the Business Corporations Act, R.S.O. 1990, c. B.16
BETWEEN
Angeliki Cormpilas and Angeliki Cormpilas as an Estate Trustee for the Estate of Barbara Ioannidis Plaintiffs (Appellants)
and
1490565 Ontario Limited, 1490804 Ontario Limited, 762519 Ontario Limited, Master Steaks Limited, 2009270 Ontario Ltd., Bill Ioannidis, John Ioannidis, and Peter Ioannidis Defendants (Respondents)
Counsel: Charles Haworth, for the appellants Chris Tonks, for the respondents
Heard: September 5, 2023
On appeal from the judgment of Regional Senior Justice Leonard Ricchetti of the Superior Court of Justice, dated January 10, 2022.
REASONS FOR DECISION
1The appellants appeal the partial [1] summary judgment granted in favour of the respondents. The judgment dismissed the bulk of the appellants’ claims, leaving a narrow list of claims undecided. For the purposes of this appeal, the aspects of the judgment that are significant are the motion judge’s dismissal of the appellants’ claim that a 2002 estate freeze of one of her parents’ businesses was not validly implemented and her claim for an oppression remedy in relation to the distribution of funds from the repayment of a vendor takeback mortgage to another business (also built by her parents), in which the appellant Ms. Cormpilas is a shareholder.
Factual Background
2This appeal, and the litigation underlying it, arises out of an acrimonious family dispute over a 20-year period, involving several closely held family corporations. It is ultimately about how successful immigrant parents chose to deal with the businesses they built upon their deaths.
3The parents, Barbara and Gregory Ioannidis, built a successful restaurant/butcher shop called Master Steaks. The success of Master Steaks allowed them to invest in other business ventures, including a gas station, a plaza, and development properties through several corporations, referred to together as the “Truckers Haven” businesses.
4Barbara and Gregory’s four children are in conflict in this litigation. On one side is the individual appellant Ms. Cormpilas, the sole daughter in the family. On the other side are her brothers, Bill Ioannidis, John Ioannidis, and Peter Ioannidis. [2]
5Barbara and Gregory ran their businesses as they saw fit until Barbara’s death in 2012.
6When Barbara died, the children learned that their parents had completed two estate freezes in 2001 and 2002 – one for their investment businesses (the Truckers Haven businesses) and one for the Master Steaks business. The Truckers Haven estate freeze was for the benefit of all four children and has not been challenged. The Master Steaks estate freeze was for the benefit of the sons, and excluded Ms. Cormpilas. The motion judge accepted evidence that the reason the parents limited the Master Steaks estate freeze to their sons was because the three sons all worked in the Master Steaks business, while Ms. Cormpilas instead developed her own successful career in real estate.
7Ms. Cormpilas had difficulty accepting that her parents would leave her out of the Master Steaks estate freeze and sought to challenge it when it was brought to light by her mother’s death in 2012. Investigations were done by lawyers and accountants. Eventually, in 2013, Ms. Cormpilas accepted the estate freezes implemented by her parents. Ms. Cormpilas, her brothers, and her father signed documents to retroactively regularize any corporate documentary shortcomings in both estate freezes.
8A gas station built by Gregory and Barbara, part of the Truckers Haven businesses, was sold in 2007 for almost $4 million. The majority of the purchase price was a vendor take back mortgage (“the VTB”) held by Truckers Haven for approximately $3.4 million, maturing in 10 years. Truckers Haven’s businesses continued to hold other assets – a plaza and vacant lands.
9In 2017, the VTB mortgage matured and was fully repaid in the amount of approximately $3.4 million (“VTB proceeds”).
10When the VTB was repaid, a dispute arose regarding the distribution of the VTB proceeds.
11Before the VTB distribution dispute was resolved, Gregory died in 2018. Gregory left his estate to Peter and John. Ms. Cormpilas was left out again. Initially, Ms. Cormpilas challenged her father’s will, but eventually gave up.
12In the claim that gives rise to this appeal, Ms. Cormpilas again challenges the validity of the Master Steaks estate freeze and the consequences of the decisions her parents made in early 2001/2002 and in her father’s will.
13In respect of the distribution of the Truckers Haven VTB proceeds, Ms. Cormpilas alleged that she was paid approximately $713,000 less than she should have been. She argued that loans were repaid from the VTB proceeds which were not supported by the financial statements. She further alleged that she is owed unpaid loans dating back to 2007, which entitle her to a greater share of distribution of the VTB proceeds.
14There were two central issues in dispute before the motion judge: (i) whether the Master Steaks estate freeze was implemented in February 2002; and (ii) whether the distribution of the VTB proceeds was oppressive. We summarize the motion judge’s findings below in the analysis. The motion judge rejected the appellants’ submission that the Master Steaks estate freeze did not occur as well as their submission that the distribution of the VTB proceeds was oppressive.
Issues Raised on Appeal
15The appellants raise three grounds of appeal:
- The motion judge erred in law and/or committed palpable and overriding errors in finding that the Master Steaks estate freeze was implemented in February 2002;
- The motion judge made palpable and overriding errors in finding that the distribution of the VTB proceeds was not oppressive;
- In his order for auditing of financial statements of the Truckers Haven businesses the motion judge erred in limiting the time period to year end 2019 onward.
Analysis
16We are not persuaded that the motion judge committed any error. In thorough reasons, the motion judge made credibility and factual findings that support the conclusions he reached. The appellants invite this court to reweigh the evidence and come to different conclusions. That is not the role of this court.
17Before turning to the grounds of appeal raised, we touch briefly on the standard of review and the appropriate approach to reviewing a motion judge’s findings on a motion for summary judgment, as well as the overarching credibility findings made by the motion judge in this case, which were adverse to Ms. Cormpilas.
18On questions of law, the standard is correctness. On questions of fact, the standard is palpable and overriding error. With respect to questions of mixed fact and law, there is a spectrum. Where there is an extricable legal error, the standard of review is correctness. However, with respect to the application of the correct legal principles to the evidence, the standard is palpable and overriding error: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at paras. 10, 26-37. Absent extricable legal error, a motion judge’s findings on a motion for summary judgment are entitled to deference. A motion judge is not required to refer to every piece of evidence in expressing their conclusions: Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at paras. 81-82; Tran v. Bloorston Farms Ltd., 2020 ONCA 440, 151 O.R. (3d) 563, at para. 80; Hersey v. Hersey, 2016 ONCA 494, at para. 13.
19The record and issues before the motion judge required him to make findings of fact based on his assessment of the credibility of a number of witnesses, together with his assessment of the documentary record. [3] The witnesses who gave evidence included Ms. Cormpilas; her brother Peter Ioannidis; [4] Strath Dimakos, the accountant for Barbara and Gregory and their companies at the time of the estate freezes in 2001 and early 2002; Nick Stamatopoulos, the accountant for Barbara and Gregory and their companies from late 2002 or early 2003 onward and who also became the compilation accountant for the corporate respondents and continues in that role; and Mark Rush, a lawyer who was involved in the investigation and regularization of the Master Steaks estate freeze documentation in 2012-13 as the solicitor for the estate trustees on Barbara’s estate and for the various corporations.
20As the motion judge recognized, the documentary record was imperfect, in the sense that, in the closely-held family corporations involved, financial records were not always maintained to the level of perfection. The motion judge recognized the shortcomings of the financial records, but found that the overall record supported the respondents’ position on the issues before him.
21In this context, the motion judge made strong adverse findings of credibility in relation to Ms. Cormpilas’ evidence. His findings included the following:
- “I find that [Ms. Cormpilas’] evidence is neither credible nor reliable. [Ms. Cormpilas’] evidence is full of bald, unsubstantiated statements and beliefs, even when those statements and beliefs are clearly inconsistent with the contemporaneous documentary evidence, even when authored by her”;
- “When a witness gives evidence contrary to [Ms. Cormpilas’] position, [Ms. Cormpilas] attacks the credibility and reliability of that witness. According to [Ms. Cormpilas], these witnesses are not believable, incompetent, fraudulent, misrepresenting, gave wrong advice, are biased, or are simply “doing Peter’s bidding”;
- “[Ms. Cormpilas’] evidence is full of inconsistencies and taking inconsistent positions”;
- “While [Ms. Cormpilas] makes statements as though factual, they need to be carefully scrutinized because often they are based on her belief, her speculation, or her misunderstanding”;
- Ms. Cormpilas engaged in “improper conduct which demonstrates the length [she] will go to to advance her financial position”;
- “[Ms. Cormpilas’] anger over having been excluded in the Master Steaks estate freeze and later her lack of inheritance from her father, colours her motives, beliefs, and statements in her claims and statements”;
- “I reject any evidence of [Ms. Cormpilas] where it was inconsistent with the evidence of another deponent or a contemporaneous document.”
The motion judge provided detailed and specific examples drawn from the evidence in support of each of these categories of reasons for finding Ms. Cormpilas’ evidence not to be credible or reliable.
22By contrast, the motion judge found the evidence of Peter Ioannidis, Mr. Dimakos, Mr. Stamatopoulos, and Mr. Rush to be credible and reliable. In making the finding that Peter’s evidence was credible and reliable, the motion judge acknowledged Peter’s financial interest in the case and that, at times in his evidence, Peter engaged in speculation about Ms. Cormpilas’ motives for certain actions. However, the motion judge found that Peter’s evidence was consistent with contemporaneous documentation.
23Bearing in mind the deference owed to a motion judge’s findings on a summary judgment motion, as well as the context of the motion judge’s strong adverse credibility findings regarding the evidence of Ms. Cormpilas, we consider each of the grounds of appeal raised by the appellants.
(i) Master Steaks Estate Freeze Implementation
24The appellants argue that the motion judge erred in finding that the estate freeze of the Master Steaks business, which excluded Ms. Cormpilas, took place in February 2002. The appellants argue that the motion judge erred in finding that the estate freeze was implemented because the minute books for Master Steaks Limited and 2009270 Ontario Inc. (“200”), the new holding corporation created in February 2002 for the purpose of implementing the estate freeze, did not show a share exchange – a requirement of a valid estate freeze under s. 85(1) of the Income Tax Act, R.S.C., 1985, c. 1 (5th Supp.). In making this submission, the appellants also rely on ss. 139(1) and (3) of the Business Corporations Act, R.S.O. 1990, c. B.16, which provide that “in the absence of evidence to the contrary”, where an Act requires that a record be kept by a corporation, information in the records of a corporation is admissible to establish the facts stated in the record. The appellants argue that the existence of other contemporaneous documentation supporting the implementation of the estate freeze, including signed rollover agreements, and signed CRA tax filings, was not a sufficient basis to find that the freeze was implemented.
25The appellants further argue that if the estate freeze was not implemented in 2002, it could not be regularized by the documentation prepared in 2013. They also argue that some of the 2013 documentation was not appropriately executed due to a lack of quorum at the time the documents were signed as a result of vacancies amongst the Master Steaks directors.
26The motion judge rejected the appellants’ position that the Master Steaks estate freeze was not effectively implemented in 2002. He found that Barbara and Gregory intended the Master Steaks estate freeze to occur in 2002 and that it did occur in 2002. The motion judge relied in particular on contemporaneous documentation which supported that the estate freeze was implemented. This documentation included: (i) the incorporation of the 200 holding company in February 2002 for the purpose of conducting an estate freeze of the Master Steaks business; (ii) subscription and resolution documents executed by the parents in 2002 that documented the various share transactions to implement the Master Steaks estate freeze; (iii) rollover agreements signed by both Barbara and Gregory in 2002, witnessed by Mr. Dimakos, where they each sold their one common share in Master Steaks Limited to the 200 holding company in return for 325,000 preference shares in the 200 holding company; (iv) a February 2002 reporting letter from the lawyer who did the legal work for the Master Steaks estate freeze confirming that Barbara and Gregory now held preference shares in the 200 holding company and that they held 100 common shares in trust for each of their sons; and (v) a T2057 filed with the CRA in 2002 showing that Barbara and Gregory disposed of their common shares in the Master Steaks business at fair market value and received preference shares in exchange, with a redemption of that same fair market value. The motion judge noted that the content of the CRA filing – which showed the exchange of shares – was “the essence of an estate freeze.”
27The motion judge found that the parents and their accountants implemented the estate freeze. He accepted the evidence of the accountant Mr. Dimakos that he discussed with Barbara and Gregory an estate freeze for both the Master Steaks and Truckers Haven businesses beginning in mid-2001, and that they instructed him to proceed with the Truckers Haven business estate freeze for the benefit of all four children, and sometime later instructed him to proceed with the Master Steaks estate freeze only for the benefit of their sons. The motion judge accepted Mr. Dimakos’ evidence that the parents explained to him that they decided to leave the Master Steaks business only to their sons because they worked for Master Steaks full-time, whereas Ms. Cormpilas had a successful real‑estate business and did not work at Master Steaks. Mr. Dimakos retained a lawyer to do the corporate work, and the Master Steaks estate freeze was implemented in February 2002. The motion judge also accepted the evidence of the second accountant, Mr. Stamatopoulos, that Barbara gave him the same explanation for why Ms. Cormpilas was not included in the Master Steaks estate freeze when he began working for Barbara and Gregory in late 2002 or early 2003.
28Based on all of this evidence, the motion judge concluded:
The above facts clearly establish that Barbara and Gregory intended to and did implement the Master Steaks estate freeze in 2002. All the contemporaneous evidence, documentary and testimonial evidence, establishes that Barbara and Gregory intended the Master Steaks estate freeze to occur in 2002; their accountants proceeded to implement that estate freeze; the documents to implement the estate freeze were signed and filed with CRA; and everyone relied on the fact that estate freeze had been implemented.
29In finding that the testimonial and documentary evidence supported that the Master Steaks estate freeze was implemented in 2002, the motion judge acknowledged that the documentary record was not without flaws. After reaching the conclusions we have just outlined, he stated:
Perhaps, if that was the end of the story, this court might have to get into the issue whether the effect of any missing or incomplete documentation in 2012 [5] resulted in the Master Steaks estate freeze not being legally implemented or effective in law. However, even that issue was put to rest in 2013.
30Having acknowledged that there was incompleteness in the contemporary documentary record about the estate freeze, the motion judge went on to find that, even though not all the necessary corporate documentation for the Master Steaks estate freeze could be found when Barbara died in 2012, all the necessary regularizing documents for the estate freeze were duly completed in 2013. This documentation was signed by Gregory and all four children. The motion judge rejected Ms. Cormpilas’ allegations that she was induced to sign the regularizing documentation in 2013 by fraudulent misrepresentation. He described that allegation as “a misconceived attempt to circumvent her exclusion in the Master Steaks business.” He found that after the issue had been investigated in 2012 and 2013, “everyone, including [Ms. Cormpilas], accepted that the Master Steaks estate freeze had occurred in 2002 and proceeded to complete the missing and needed documentation to regularize the 2002 Master Steaks estate freeze” (emphasis in the original).
31We see no error in the motion judge’s conclusions that the Master Steaks estate freeze was implemented in February 2002, and in the alternative, that if there were any shortcomings with the documentation, they were regularized in 2013.
32The reasons of the motion judge are clear that he understood the statutory requirements for an estate freeze under s. 85 of the ITA. He rejected the appellants’ submission that the estate freeze was not implemented in 2002 because he found that it was not supported by the evidentiary record before him. The assessment of the evidentiary record was his call to make.
33A central plank of the appellants’ submission that there was palpable and overriding factual error in the motion judge’s finding that the Master Steaks estate freeze was implemented in 2002 is the submission that he failed to expressly mention an extract of a resolution of the 200 holding corporation, dated February 19, 2002, signed by both Gregory and Barbara. The resolution provides for the issuance of 300 common shares, to be issued to Gregory and Barbara in trust for their sons (100 shares in trust for each son). The same resolution also provides for the issuance of 225,000 Class A Special Shares (preference shares) each to Barbara and Gregory. However, on the copy of the resolution filed on the motion, the portion in relation to the preference shares is crossed out. The appellants argue that the transfer of preference shares is an essential part of an estate freeze, and that the motion judge committed palpable and overriding error in not expressly referring to this document, and the fact that the preference share portion was crossed out, in his reasons.
34We reject this submission. As we have outlined above, a motion judge is not required to refer to every piece of evidence. In his reasons, the motion judge canvassed the record before him in great detail and carefully explained his factual findings. As we have noted above, the motion judge acknowledged that there were flaws in the contemporaneous documentary record from 2002 in relation to the estate freeze. But considering the record as a whole, he was satisfied that the freeze was implemented in 2002. We see no basis to interfere with this factual finding simply because he did not expressly reference a particular piece of evidence. Further, we note that there is no evidence as to when the portion of the February 19, 2002 resolution about the preference shares was crossed out.
35We also reject the appellants’ submission that the motion judge erred in law in considering the filings made to the Canada Revenue Agency in relation to the Master Steaks estate freeze in 2002 as evidence that the freeze was implemented. The fact of the CRA filings is not, standing alone, determinative as to whether the estate freeze took place. The CRA filings do not themselves implement the freeze. But the CRA filings are circumstantial evidence that could be considered along with the rest of the documentary and testimonial evidence as probative of whether the estate freeze was implemented in 2002. We note as well that at no time during the past 20-plus years since 2002 has the CRA challenged the validity of the Master Steaks estate freeze or sought to reassess the parents.
36In sum, the reasons of the motion judge show that he understood the legal requirements for an estate freeze. He rejected the appellants’ claim and found that the Master Steaks estate freeze was validly implemented in 2002 on the basis of the evidence on the motion. His assessment of the evidence is entitled to deference.
37In light of our conclusions on the issue of the implementation of the Master Steaks estate freeze, it is not necessary to consider the motion judge’s alternate finding regarding the limitation period.
(ii) Distribution of VTB Proceeds and Oppression
38Ms. Cormpilas argues that the motion judge erred in finding that the distribution of the VTB proceeds was not oppressive. Ms. Cormpilas is a shareholder of the Truckers Haven holding company (created pursuant to the Truckers Haven estate freeze). She argues that she was oppressed by a shareholder loan made by her to the business not being repaid when the VTB mortgage matured. She further argues that she was oppressed by the repayment of other loans and liabilities out of the VTB proceeds prior to distribution to the shareholders. She argues that the financial records of the corporation did not support that these payments were due by the corporation in the amounts paid out. The liabilities at issue were amounts for additional probate tax on Barbara’s estate; repayment to Gregory’s estate of a loan; repayment to Barbara’s estate of a loan; repayment to Master Steaks of a loan; payment of retained unpaid dividends, which Ms. Cormpilas alleged were contrary to the corporation’s dividend policy; and a small amount for legal fees.
39The same issues raised on appeal were before the motion judge: (i) Ms. Cormpilas’ claim that she was owed repayment of a shareholder loan of $284,000; and (ii) Ms. Cormpilas’ disputing the payment of various outstanding liabilities of the Truckers Haven business from the repayment of the VTB proceeds prior to distributing the remaining amount to shareholders (the children).
40With respect to Ms. Cormpilas’ claim of an outstanding shareholder loan due to her, the motion judge rejected her evidence that she had made a construction loan to the Truckers Haven business. He found that there was evidence that Ms. Cormpilas had loaned her parents money between 2002 and 2006 for the construction of the gas station. However, he rejected her evidence that she loaned money to the Truckers Haven business. Rather, the motion judge preferred the evidence of Mr. Stamatopoulos that no loan from Ms. Cormpilas to the Truckers Haven business is recorded in the financial statements of the business.
41With respect to the payment of various loans and liabilities by the corporation from the VTB proceeds prior to distribution to shareholders, the motion judge found that the decision to pay these outstanding liabilities of the Truckers Haven business was a reasonable corporate decision made by the directors at a directors meeting. The motion judge held that a court will not, and ought not, interfere with business decisions made by directors, unless it is established that the decision was not done honestly, in good faith, and in the best interests of the corporation. We understand this to be a reference to the “business judgment rule”, which accords deference to business decisions, so long as they lie within a range of reasonable alternatives: see BCE Inc. v. 1976 Debetureholders, 2008 SCC 69, [2008] 3 S.C.R. 560, at para. 40; 3716724 Canada Inc. v. Carleton Condominium Corporation No. 375, 2016 ONCA 650, at para. 48; Brant Investments Ltd. v. KeepRite Inc. (1991), 3 O.R. (3d) 289 (C.A.), at p. 320. The motion judge also held that the directors’ approval of the VTB distributions were not oppressive nor unfairly prejudicial of Ms. Cormpilas’ shareholdings and claims to loans for unpaid commissions or construction loans.
42We are not persuaded that the motion judge made any error in finding that there was no oppression of the appellants in the distribution of the VTB proceeds.
43The appellants challenge the motion judge’s findings on purely factual grounds. The findings of fact made by the motion judge in relation to the distribution of the VTB proceeds were open to him on the record. His findings are owed deference and we see no basis to interfere.
(iii) Audit Time Frame Limitation
44The appellants argue that the motion judge erred by limiting his order for an audit of the Truckers Haven businesses (made up of three corporations) to the time period from year end 2019 onward. The appellants had sought an audit commencing July 31, 2016. They argue that there was no basis in fact or law to limit the audit to year end 2019 onwards.
45The appellants’ request for the appointment of auditors was made in the context of the issues in this litigation. Given the narrowness of the issues left undecided in this litigation after the partial summary judgment granted by the motion judge, we would not interfere with his decision to limit the audit to year end 2019 going forward.
Disposition
46The appeal is dismissed. The appellants shall pay costs of the appeal to the respondents in the amount of $25,000, inclusive of disbursements and applicable taxes.
“E.E. Gillese J.A.”
“M.L. Benotto J.A.”
“J. Copeland J.A.”
Footnotes
1No issues are raised on appeal regarding the fact that the summary judgment granted was partial. We note as well that the motion judge had concerns about Ms. Cormpilas’ capacity to bring this action in her representative capacity on behalf of her mother’s estate, given that she did not have the consent of the other two estate trustees. This issue was not the subject of submissions on appeal.
2We use the first names of the family members with the last name Ioannidis for ease of reference.
3Although the materials filed by both parties on the motions were extensive, the appellant does not argue that it was inappropriate for the motion judge to proceed on the basis of summary judgment. This is consistent with the following observation of the motion judge near the start of his reasons: “Neither party sought an adjournment of these motions until after the discoveries were completed. Both parties were content to rely on the documents in their possession, extensive productions by way of Affidavits of Documents (and several supplementary Affidavits of Documents), their affidavits filed on these motions, and extensive cross-examinations. As such, it is not open to either side to allege that more information or documentation could or would be available later. The parties chose to rely on this evidentiary record for the purpose of these motions.”
4Although a joint affidavit on behalf of all three brothers was filed, Peter carried the bulk of the evidence on behalf of the brothers. There were also several individual affidavits by Peter filed on the motion. It appears that only Peter was subject to cross-examination on his affidavits on the motion.
5The reference to documents missing in 2012 refers to a discussion earlier in the reasons where the trial judge noted that, at the time of Barbara’s death in 2012, Mr. Dimakos could not locate the signed rollover agreements in relation to both estate freezes. When the motions giving rise to this appeal arose, Mr. Dimakos checked in his storage facility, and in May 2021 located the original rollover agreements for both estate freezes.