Court File and Parties
COURT FILE NO.: 36/04 DATE: 2005-06-01
ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
RE: The Estate of Luigi Buttarazzi by his Executors, Tony Buttarazzi and Peter Buttarazzi v. Giuseppe Bertolo, Roland DiFlorio, Patricia DiFlorio and Con Steel Ltd.
BEFORE: O’Driscoll, Jennings and Swinton J.
COUNSEL: Marco Drudi for the Applicant/Respondent on Appeal Ronald G. Chapman for the Respondents/Appellants on Appeal
HEARD at Toronto: May 25, 2005
ENDORSEMENT
Endorsement
1The appellants raised two issues: that the application judge failed to appreciate material evidence when she concluded that there was not a binding shareholders’ agreement, and that she erred in failing to determine the reasonable expectations of the shareholders, for purposes of the oppression remedy, having regard to the terms of the shareholders’ agreement which Luigi Buttarazzi had signed.
2The application judge found that there was no binding shareholders’ agreement because one of the shareholders, Patricia DiFlorio, had failed to sign the agreement. There was evidence supporting this conclusion. Section 108 of the Ontario Business Corporations Act requires that all shareholders sign a shareholders’ agreement. Therefore, the application judge did not err in finding that there was no binding agreement among the shareholders. Indeed, the evidence shows that as of October 18, 1998, the solicitors of the parties were actively negotiating a shareholders’ agreement, and their correspondence and memos made no reference to an existing agreement binding the parties.
3In the alternative, the appellants argued before us that in considering all the evidence in the record, the reasonable expectations of the shareholders, for purposes of the oppression remedy, should be determined by considering the terms of the draft agreement signed sometime before March, 1996. According to the appellants, the valuation of the shares should be determined by their net book value at the date of Mr. Buttarazzi’s death on April 22, 1999, in accordance with the terms of that document.
4We are of the view that the evidence leads to the opposite conclusion. The evidence shows that the parties did not abide strictly by the terms of the purported shareholders’ agreement, and they had never valued the shares as set out in Article 14. Moreover, the parties were in the process of negotiating a draft shareholders’ agreement in 1998, which would have provided that the value of the shares should be their fair market value, as determined by an independent business valuator, if the parties did not agree on value. Finally, the evidence does not show that the respondents had taken steps to implement the provisions of the 1990 agreement to buy out the shares of Mr. Buttarazzi after his death.
5The evidence supports the conclusion of the application judge that there had been oppression. Moreover, the evidence supports the conclusion that Mr. Buttarazzi had a reasonable expectation that his shares would be purchased by the other shareholders after his death. In the absence of any agreement on the process for valuation, the normal procedure is to determine fair market value without minority discount. In the absence of an agreement by the parties, it was up to the application judge to set the valuation date, which she ordered to be June 1, 2000, the date that the application was commenced.
Disposition
6We see no error of law or fact in her decision. Therefore, the appeal is dismissed. If the parties can not agree on costs, they may make brief written submissions within 21 days of the release of this decision.
O’Driscoll J.
Jennings J.
Swinton J.
Released: