CITATION: Falus v. Martap Developments 87 Limited, 2013 ONSC 4115
DIVISIONAL COURT FILE NO.: 411/12
DATE: 20130613
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
SWINTON, HERMAN AND LEDERER JJ.
BETWEEN:
THOMAS FALUS
Applicant
(Appellant)
– and –
MARTAP DEVELOPMENTS 87 LIMITED, VINCE BENEDETTO, ANTOINETTE BENEDETTO, ANDREW BENEDETTO, PAUL BENEDETTO and JULIA MCGEOWN
Respondents
Michael J. W. Round, for the Appellant
Ronald B. Moldaver, Q.C., for the Respondents, Vince Benedetto, Antoinette Benedetto, Andrew Benedetto, Paul Benedetto and Julia McGeown
HEARD at Toronto: June 13, 2013
SWINTON J. (ORALLY)
[1] The application judge had a broad discretion as to whether to order the winding-up of the corporation or order other equitable relief pursuant to s. 207(1)(b)(iv) and 207(2) of the Business Corporations Act, R.S.O. 1990, c. B. 16. He set out the correct legal principles, noting the courts usually intervene where there has been a breakdown in mutual confidence such that the parties cannot work together as mutually contemplated or a party’s ability to exercise his legal rights in the governance of the corporation has been impaired.
[2] In particular, the application judge quoted from the decision of Wilton Siegel J. in Animal House Investments Inc. v. Lisgar Development Ltd. (2007), 2007 82794 (ON SC), 87 O.R. (3d) 529 (S.C.J.) [upheld 2008 27471 (ON SCDC), [2008] O.J. No. 2240 (Div. Ct.)] at para. 46 of his Reasons, emphasizing the following sentence:
Accordingly, incompatibility is significant only insofar as it has resulted in a state of affairs in which the reasonable expectations of the parties are unattainable and from which the Court can reasonably infer that the business arrangement between the parties has been repudiated or terminated.
[3] The application judge found that the disagreement between the parties had not impaired the operations of the corporation nor impaired the ability of either shareholder to exercise his legal rights in the governance of the corporation. He rejected the appellant’s argument that he had a reasonable expectation that he would only have to deal with Vince in the management and affairs of the corporation, basing his conclusion on the failure of the parties to deal with retirement or withdrawal at the time of the incorporation of the company, the long-term nature of the corporation’s business and Tom’s agreement to allow Vince’s children to participate in the corporation’s governance.
[4] The appellant argues that the application judge erred in failing to consider what the parties would have contemplated with respect to retirement or exit had they turned their minds to this issue in 1987. He also argues that the application judge should have taken into account the Partnership Act exit provisions.
[5] In our view, there was no legal error. The application judge correctly held that the Partnership Act did not apply, as he was dealing with dissolution of a corporation. However, he did consider cases in which the courts have intervened in the affairs of a partnership operating in the guise of a corporation.
[6] A full and complete reading of the Reasons of the application judge leads to the conclusion that he appropriately considered the reasonable expectation of the parties at the time of incorporation and through the years of the corporation’s operations.
[7] The application judge had a broad discretion whether to grant the equitable relief sought. He found there was no irreconcilable conflict or exclusion from management and no reasonable expectation of the parties over the life of the corporation that there would be a wind-up or a forced sale of shares if either of the original parties no longer wished to remain active in the business. Accordingly, he concluded that the relief sought should not be granted.
[8] The appellant has not demonstrated any palpable and overriding error of fact nor any error of law. Therefore, the appeal is dismissed.
COSTS
[9] I have endorsed the back of the Appeal Book, “This appeal is dismissed for oral reasons delivered in court today. Costs to the respondent fixed at $6,000 all inclusive.”
SWINTON J.
HERMAN J.
LEDERER J.
Date of Reasons for Judgment: June 13, 2013
Date of Release: June 19, 2013
CITATION: Falus v. Martap Developments 87 Limited, 2013 ONSC 4115
DIVISIONAL COURT FILE NO.: 411/12
DATE: 20130613
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
SWINTON, HERMAN AND LEDERER JJ.
BETWEEN:
THOMAS FALUS
Applicant
(Appellant)
– and –
MARTAP DEVELOPMENTS 87 LIMITED, VINCE BENEDETTO, ANTOINETTE BENEDETTO, ANDREW BENEDETTO, PAUL BENEDETTO and JULIA MCGEOWN
Respondents
ORAL REASONS FOR JUDGMENT
SWINTON J.
Date of Reasons for Judgment: June 13, 2013
Date of Release: June 19, 2013