COURT FILE NO.: 226/05 and 221/05

DATE: 20051006

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

THEN, EPSTEIN AND LAX JJ.

B E T W E E N:

FRESH NETWORK LLC

Respondent

• and -

FARMERS FRESH DISTRIBUTORS LTD., DOMENIC ALESSANDRO and JOE ALESSANDRO

Appellant

Robert H. Waddell, for the Respondent

Gregory N. Hemsworth, for the Appellant Joe Alessandro

HEARD: October 6, 2005

LAX J.: (Orally)

1Fresh Network LLC, who is the respondent on this appeal sold fresh produce to Farmers Fresh Distributors Ltd. but did not receive payment. Fresh Network brought an application under s.248 of the Ontario Business Corporations Act against the corporation and two individuals, Domenic Alessandro and Joe Alessandro.

2Spence J. found that the amounts owing to the corporation for the produce were subject to a statutory trust under the United States Perishable Agricultural Commodities Act (PACA) and that as no amounts had been remitted to Fresh Network, there was a breach of trust established under that Act. He also found that Fresh Network, as the beneficiary of the statutory trust and as an unpaid creditor, had status as a claimant under s.248 of the OBCA and that the corporation’s failure to remit payment to Fresh Network was oppressive conduct under this section. He concluded that Fresh Network was entitled to a remedy under s.248(3) of the OBCA in the form of an order for payment against the corporation. No issue is taken with this finding.

3Spence J. then held that the two individuals associated with the corporation, namely, Domenic Alessandro and Joe Alessandro each had personal liability for the debt. In his endorsement he wrote:

“The invoices in question are for produce shipped between July 31, 2003 and August 19, 2003 and they have remained unpaid since then. So each of the two Alessandros has been in the position of senior authority in Farmers Fresh for some part of the time during which the breach of trust and the oppressive conduct has occurred and it appears that together or one after the other they may have been the only directors and officers and controlling minds over the period. So the order may properly be made against them also, and should be.”

4Joe Alessandro brings this appeal denying that he has any personal liability for the debt. We are satisfied that there was evidence before Spence J. to support his finding that Joe Alessandro was a director of Farmers Fresh Distributors Ltd. at the time the corporation’s obligation to Fresh Network arose. However, this fact alone is not sufficient to establish personal liability under s.248 of the OBCA.

5The onus was on Fresh Network to establish that Joe Alessandro exercised his powers as a director in a manner that was oppressive or unfairly prejudicial or unfairly disregarded the interest of Fresh Network. See Ferguson v. Imax Systems (1983), 43 O.R. (2d) 128 at p.137.

6Before us, counsel for Fresh Network conceded that there was no evidence before Spence J. of any conduct on the part of Joe Alessandro that interfered with the fulfillment of the corporation’s obligations to Fresh Network. In these circumstances, notwithstanding any liability Joe Alessandro may have under PACA, no liability attaches under s.248.

7The appeal is therefore allowed from the decision of Spence J. and the judgment dated May 19, 2004 against Joe Alessandro is set aside.

8There was also before us an appeal from the decision of Cumming J. refusing to set aside the decision of Spence J. on the basis of mistake under Rule 38.11. We agree with the reasons of Cumming J. which are consistent with the decision of the Ontario Court of Appeal in Zsoldos v. Ontario Assn. of Architects, [2004] O.J. No. 309 (C.A.). Therefore, this appeal is dismissed.

THEN J.

9I have endorsed the appeal book pertaining to the appeal against the order of Spence J. as follows: “The appeal is allowed for the oral reasons of the Court delivered by Lax J. In the circumstances of this case where there has been divided success and notwithstanding the failure of Joe Alessandro to appear before Spence J., we are of the view that it is fair and reasonable to award no costs.”

10With respect to the appeal against the order of Cumming J., I have endorsed the appeal book as follows: “The appeal is dismissed for oral reasons of the Court delivered by Lax J. No costs.”

THEN J.

EPSTEIN J.

LAX J.

Date of Reasons for Judgment: October 6, 2005

Date of Release: October 17, 2005

COURT FILE NO.: 226/05 and 221/05

DATE: 20051006

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT