Citation: Cocov v. Gorgiev, et al., 2012 ONSC 364
DIVISIONAL COURT FILE NO.: 457/11
DATE: 20120113
ONTARIO
SUPERIOR COURT OF JUSTICE
(DIVISIONAL COURT)
ASTON, PEPALL and LAUWERS J.J.
B E T W E E N:
ZORAN COCOV and DITA COCOV
Appellants
- and -
DIMITAR GORGIEV, LYRIC CENTURY APARTMENTS INC.
Respondents
COUNSEL:
R. Quance, for the Appellants
K.J. Manning/ M. Shapiro, for the Respondents
HEARD: January 13, 2012
ENDORSEMENT
BY THE COURT:
[1] Dita Cocov (“Dita”) and Zoron Cocov (“Zoran”), appeal only paragraphs 1,2,3 and 9 of the order of the application judge under the Ontario Business Corporations Act dated September 14, 2011, in which he: set the fair market value of the shares of Lyric Century Apartments Inc. (“Lyric”) to be $932,000.00; directed that Dimitar Gorgiev (“Gorgiev”), one of the Respondents, pay Dita $466,000.00 for her half of the shares in Lyric; and required Lyric to repay Zoran $454,000.00 for a shareholder loan.
The Standard of review
[2] The standard of review with respect to the facts and the law is as set out in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235. With respect to discretionary orders made under s. 207 and/or s. 248 of the OBCA, an appellate court is only entitled to interfere where it has been established that the lower court has erred in principle or its decision is otherwise unjust: Naneff v. Con-Crete Holdings Ltd. (1995), 1995 959 (ON CA), 23 O.R. (3d) 481 (C.A.).
Decision
[3] The parties agree that paragraph 3 of the order of the application judge requiring that Lyric repay Zoran Cocov $454,000.00 for a shareholders loan on closing was made in error. That order ought to have been addressed to Dita Cocov. The order is amended accordingly.
[4] The critical heart of the application judge’s decision is in the following paragraphs:
Mr. Hacker relied on the valuation of that property prepared by Mr. Peter Aziz (“Mr. Aziz”), dated June 2, 2011. Mr. Aziz valued the Mary Street property at $830,000.00.
As indicated earlier, the Mary Street property was the subject of an Agreement of Purchase and Sale for $775,000.00; however, the sale did not close. During the course of argument on the earlier motion, which resulted in April 26, 2011 endorsement, it was clear that the parties disagreed about the Mary Street property. Zoran Cocov thought the property should be sold. Dimitar Gorgiev thought the property should be developed. I conclude from this disagreement that the merits of developing the property were not so obvious to Zoran Cocov that he was prepared to manage his disagreements with Dimitar Gorgiev for the sake of the project. In the same vein, one of the appraisals provided by the Respondent, Lyric Century Apartments Inc., which was prepared prior to the commencement of this application, indicated that the value of the property would be negatively affected, if the City were to construct a six-storey structure to the North and East of the Mary Street property. This appraisal, prepared by Antec Appraisal Group Inc., which valued the property at $400,000.00 on April 5, 2010, predated the filing of the Notice of Application in this matter.
The Respondents also filed an appraisal prepared by Town & Country Appraisals in contemplate of this hearing, which valued the Mary Street property at $300,000.00 as at May 10, 2011.
I am satisfied that $400,000.00 more accurately reflects the value of the Mary Street property. Accordingly, I have substituted that value into the analysis prepared by Mr. Hacker.
[5] With respect to paragraphs 1 and 2 of the order, we are unable to determine the basis on which the application judge determined that the value of the Mary Street property was $400,000.00. Although he laid out the various valuations for the property, he did not explain why he selected that number. As a result meaningful appellate review of the reasons on this issue is not possible, and the decision relating to the valuation of the Mary Street property must be set aside on that basis: R. v. R.E.M., 2008 SCC 51, [2008] 3 S.C.R. 3 at para. 35, R. v. Braich, 2002 SCC 27, [2002] 1 S.C.R. 903 at para. 40.
[6] The application judge’s insertion of that $400,000.00 number into the final calculation carried out by Mr. Hacker effectively meant that he did not actually apply Mr. Hacker’s approach, even though he accepted it. The tax consequences of a lower sale figure on the Mary Street property required a re-adjusted tax calculation, one that neither the application judge, nor this court on appeal, is able to perform, if the property is valued at less than $830,000.00. This is a palpable and overriding error.
[7] We allow the appeal and remit the matter to the Team Leader of the Commercial List to assign a judge to determine the value of the Mary Street property to be used in the recalculation of the tax-adjusted value of the shares using the methodology in the Hacker Report.
[8] The costs of the application are referred to the judge assigned to determine the value of the Mary Street property.
Justice D. Aston
Justice S. Pepall
Justice P.D. Lauwers
DATE: January 13, 2012