COURT FILE NO.: 151/05

DATE: 20051101

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

EPSTEIN, LAX AND SWINTON JJ.

B E T W E E N:

PHYLLIS LAWRIE VANSTONE

Appellant

(Applicant)

• and -

1402133 ONTARIO CORPORATION, BRUCE VANSTONE, LEANNE TOWNSEND, LEANNE TOWNSEND AS ESTATE TRUSTEE OF ALLEN BARRY VANSTONE AND TREVOR TOWNSEND

Respondents

(Respondents)

Jerry Topolski, for the Appellant

Arnie Herschorn and Stephen C. Nadler, for the Respondents

HEARD at Toronto: November 1, 2005

EPSTEIN J.: (Orally)

1This is an appeal from the decision of Madam Justice Hoy, dated March 16, 2005, dismissing Ms. VanStone’s application for relief under s.248 of the Ontario Business Corporations Act, R.S.O. 1990, c.B.16.

2In February of 2000, the late Barry VanStone set up a numbered company for the sole purpose of holding a condominium in Florida which he purchased. The shareholders of the corporation were his wife, the appellant, Phyllis VanStone and Barry’s two children. Ms. VanStone expected that after her husband’s death, the condominium would be sold and that the proceeds would be distributed equally to the shareholders. This was Mr. VanStone’s stated intention as well.

3In dismissing the application, Justice Hoy made the following findings:

(i) There was a loan from Mr. VanStone to the numbered company;

(ii) Mr. VanStone did not forgive the loan during his lifetime;

(iii) Mr. VanStone did not forgive the loan at his death;

(iv) The loan remained an obligation of the numbered company.

4In our view, these findings of fact are amply supported by the evidence.

5Counsel for Ms. VanStone submits that Justice Hoy erred in failing to find that Mr. VanStone made either an inter vivos gift or a non-probate testamentary gift to the shareholders. Justice Hoy disposed of this argument in paragraphs 26 and 27 of her reasons as follows:

“In my view, this case must be distinguished from Wonnacott v. Loewen (1990), 44 B.C.L.R. (2d). Mr. VanStone did not sign any document prior to his death providing for the forgiveness of the loan on death. No immediate interest in the loan was conveyed. The alleged forgiveness of the loan does not fall within the category of non-probate testamentary gifts.

I conclude that Mr. VanStone did not comply with the requirements of an inter vivos or a testamentary gift and that the loan was therefore not forgiven.”

6Justice Hoy then went on to consider the applicant’s claim for relief under s.248 of the Ontario Business Corporations Act. In paragraph 31 and partway through paragraph 32 of her decision, Justice Hoy reasoned as follows:

“In my view, this is not an appropriate instance for the court to make an order under section 248. In this case, given the existence of the loan, the distribution of the sale proceeds to the three shareholders would have violated the solvency tests in the Act and rendered the directors who authorized the payment liable to restore the amounts distributed. Not only was the payment of the loan lawful, the distribution of the sale proceeds would have been unlawful.

The debtor Corporation and the directors of the Corporation were not in a position to forgive the loan following Mr. VanStone’s death; only the estate could do so. What the Applicant in effect attacks is the failure of the estate to forgive the loan, not an act of the Corporation or of the directors of the Corporation, acting as such. While the majority of the directors of the Corporation were also the executors of the estate, their conduct as executors in failing to give up an asset of the estate, and not their conduct as directors, is at issue.”

7In our view, Justice Hoy was correct in law in coming to these conclusions.

8While Mr. VanStone expressed an intention to provide his wife with a one-third share of the value of the condominium, he did not take proper steps to put this intention into effect. Justice Hoy was correct in concluding that the Court could not make the unforgiven loan disappear under the oppression remedy. The appeal is therefore dismissed.

9The Appeal Book shall read as follows: “For oral reasons given, the appeal is dismissed. The respondents are entitled to their costs of the appeal, fixed in the amount of $10,500.00, including disbursements and GST.”

EPSTEIN J.

LAX J.

SWINTON J.

Date of Reasons for Judgment: November 1, 2005

Date of Release: November 10, 2005

COURT FILE NO.: 151/05

DATE: 20051101

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

EPSTEIN, LAX AND SWINTON JJ.

B E T W E E N:

PHYLLIS LAWRIE VANSTONE

Appellant

(Applicant)

• and -

1402133 ONTARIO CORPORATION, BRUCE VANSTONE, LEANNE TOWNSEND, LEANNE TOWNSEND AS ESTATE TRUSTEE OF ALLEN BARRY VANSTONE AND TREVOR TOWNSEND

Respondents

(Respondents)