Court File and Parties
CITATION: Ciup v. Weinreb, 2018 ONSC 639
DIVISIONAL COURT FILE NO.: 147/17
DATE: 20180126
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
KITELEY, PATTILLO and CAVANAGH JJ.
BETWEEN:
LAURENT CIUP and ERIC MESSIKA, also known as Eric Chaim Messika Appellants/ (Plaintiffs)
– and –
YISROEL WEINREB, ANTHONY HELLER, HELMSBRIDGE HOLDINGS LIMITED, EZRIEL YEHUDA GESTETNER and E MOBILE INC. Respondents/ Defendants
Counsel: David S. Altshuller, for the Appellants/ (Plaintiffs) Christopher Reed, for the Respondents/Defendants
HEARD: November 2, 2017
BY THE COURT
Introduction
[1] The Appellants, Laurent Ciup and Eric Messika appeal from the December 16, 2016 order of Penny J. (the "Motion Judge") which granted partial summary judgment dismissing a number of the Appellants' claims for relief including their claim for damages under s. 248 of the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 (the "OBCA") as set out in the Amended Statement of Claim (the "Order").
[2] For the reasons that follow, apart from a minor amendment to the Order to correct an error, we dismiss the appeal.
Background
[3] The Appellants are minority shareholders of the Respondent E Mobile Inc. ("E Mobile"). The individual Respondents are officers and/or directors of E Mobile. All, except the Respondent Anthony Heller ("Heller") are shareholders. Heller's company, the Respondent Helmsbridge Holdings Limited ("Helmsbridge") is a shareholder. Together, the Respondents control E Mobile.
[4] E Mobile was founded in 2008 and was in the telephone roaming business. It never made money and always operated at a loss. It was principally financed by Helmsbridge. At the time of the motion, E Mobile's liabilities exceeded its assets. It was insolvent.
[5] The Appellants commenced their action in 2014. The Appellants' claim, as set out in the Amended Statement of Claim, is based on oppression (s. 248 of the OBCA), breach of contract and tort. The Appellants allege that the conduct of the Respondents, who were in control of E Mobile, was prejudicial and unfairly disregarded their interests. They further allege that the Respondents actions were in breach of the shareholders agreement between the parties. They claim damages, including punitive, exemplary and aggravated damages as well as other relief.
[6] Notwithstanding that the Respondents' motion sought dismissal of the action, in argument, the motion was limited to a motion for partial summary judgment on the question of whether there was a genuine issue requiring a trial on the issue of causation with respect to the Appellants' claims for damages.
[7] For the purpose of the motion, the Respondents proceeded on the assumption that the alleged acts of oppression and the steps alleged to have been taken in contravention of the shareholders' agreement occurred. The Respondents submitted there was no causal link between any such conduct and the damages claimed by the Appellants. Rather, any loss suffered by the Appellants was a result of their investment in a business that failed to prosper.
[8] The Motion Judge considered the evidence before him, including affidavit evidence from an expert forensic accountant retained by the Appellants, and concluded that the Appellants had failed to adduce any evidence that the alleged wrongful acts on the parts of the Respondents caused them any damages. The Motion Judge concluded that when the Appellants invested in the Company, it had debts of $2.5 million, that the Appellants were aware of that and knew the Company was losing money, and that the Company's indebtedness increased due to ongoing losses. In the result, the Motion Judge concluded that there was no genuine issue requiring a trial on the issue of damages or causation, and dismissed the Appellants' claim for damages in paragraph 1(i) as well as other claims in paragraphs 1(a)(1), 1(a)(2), 1(a)(3), 1(a)(4), 1(b), 1(c), 1(d), 1(h), and 1(j) of the Amended Statement of Claim.
The Issues
[9] On this appeal, the Appellants submit:
a. The Motion Judge erred in granting summary judgment to the Respondents and dismissing the Appellants' claim pursuant to s. 248 of the OBCA;
b. The Motion Judge erred in granting summary judgment to the Respondents and dismissing the Appellants' claims for breach of contract, inducing breach of contract, intentional interference with economic relations and negligence; and
c. The Motion Judge erred in failing to find that a breach of s. 248 of the OBCA can and should attract damages at large or punitive, aggravated and exemplary damages.
Standard of Review
[10] The standard of review on an appeal from the decision of a judge on a question of law is correctness; on findings of fact it is palpable and overriding error and on a question of mixed fact and law, it is palpable and overriding error unless there is an extricable legal principal, in which case it is correctness: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R 235 (S.C.C.).
Analysis
i. Did the Motion Judge err in granting summary judgment to the Respondents and dismissing the Appellants' claim pursuant to s. 248 of the OBCA?
[11] The Motion Judge held that there was no genuine issue for a trial of the Appellants' oppression claim, on the basis that there was no evidence that the alleged acts of oppression caused any damage to either E Mobile or the Appellants. In reaching that conclusion, the Motion Judge reviewed the evidence, and particularly the evidence of the Appellants' expert forensic accountant who had access to E Mobile's accounting records.
[12] In support of their submission that the Motion Judge erred in law in granting summary judgment to the Respondents, the Appellants submit that the Motion Judge erred in law in concluding that a claim for damages for statutory oppression under s. 248 of the OBCA cannot be made without proof of causation and damages.
[13] The law is clear, however, that a claim for oppression requires wrongful conduct, causation and compensable injury. In BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, [2008] 3 S.C.R. 560, a leading authority in respect of an oppression claim, the Supreme Court of Canada addressed the requirements for a claim for oppression at para. 90 as follows:
Nevertheless, it is worth stating that as in any action in equity, wrongful conduct, causation and compensable injury must be established in a claim for oppression.
[14] In our view, the Motion Judge was correct in concluding that in the absence of any evidence of causation or damages, an oppression claim for damages pursuant to s. 248 of the OBCA cannot succeed.
[15] Further, the Appellants do not point to any particular finding of fact or mixed fact and law made by the Motion Judge that they submit gives rise to a palpable and overriding error. In particular, the Appellants have not shown that the Motion Judge made a palpable and overriding error in finding that (i) the Appellants "utterly failed" to adduce any evidence that the alleged acts of oppression caused them any damages, and (ii) that the failure of E Mobile was in any way related to the alleged acts of oppression.
[16] The Appellants also rely on the recent decision of the Court of Appeal in Butera v. Chown Cairns LLP, 2017 ONCA 783 in support of their submission that the Order granting partial summary judgment should be set aside. In Butera, the Court of Appeal held that a motion for partial summary judgment should be considered to be a rare procedure that is reserved for an issue or issues that may be readily bifurcated from those in the main action and that may be dealt with expeditiously and in a cost-effective manner.
[17] Butera was decided after the motion was decided. Further, the Appellants did not take the position before the Motion Judge that a motion for partial summary judgment was not available. In fact, they too sought partial summary judgment of their claim on the motion.
[18] The Motion Judge addressed a discrete issue, whether there is a genuine issue requiring a trial on the issues of causation and damages. The Motion Judge allowed the Appellants to proceed with their action for a declaration that the Respondent's conduct in the operation and management of E Mobile was oppressive, and to seek certain remedies to rectify the matters complained of, including claims for punitive, aggravated and exemplary damages. We are not satisfied that, applying the principles expressed in Butera, the Appellants have shown that the Motion Judge erred in granting partial summary judgment.
ii. Did the Motion Judge err in granting summary judgment to the Respondents and dismissing the Appellants' claims for breach of contract, inducing breach of contract, intentional interference with economic relations and negligence?
[19] The Appellants submit that the Motion Judge, who allowed the claim in paragraph 1(a) of the Amended Statement of Claim for a declaratory order that there was oppressive conduct to proceed, erred by dismissing the claim in paragraph 1(b) of the Amended Statement of Claim in which the Appellants' claim (in addition to or in the alternative to the relief set out in paragraphs 1(a), 1(a)(1), 1(a)(2), 1(a)(3), and 1(a)(4)) is for "an interim, interlocutory and/or final Order granting such other relief pursuant to subsection 248(3) of the OBCA as this Honourable Court may deem appropriate".
[20] Section 248(3) of the OBCA empowers the court, on a finding of oppression to make any order "it thinks fit". It grants to the court a broad discretion to fashion a remedy: Naneff v. Con-Crete Holdings Ltd. (1995), 85 O.A.C., 23 O.R. (3d) 481 (C.A.) at para. 18.
[21] In our view, based on his reasons, the Motion Judge intended to allow the Appellants to proceed with their oppression claim for declaratory relief in paragraph 1(a) of the Amended Statement of Claim and for relief under subsection 248(3) of the OBCA, other than the claims for relief which included or related to the claim for general damages. To the extent therefore that the Order excludes the Appellants' right to claim "an interim, interlocutory and/or final Order granting such other relief pursuant to subsection 248(3) of the OBCA" (other than the relief claimed in the paragraphs of the Amended Statement of Claim that were dismissed), we regard this to be an accidental error by the Motion Judge.
[22] Accordingly, pursuant to r. 59.06(1) of the Rules of Civil Procedure, the Order is amended by striking out "1(b)" as it appears in paragraph 1 of the Order, such that para. 1 of the Amended Order now reads:
- THIS COURT ORDERS that the claims for relief of the plaintiffs in paragraphs 1(a)(1), 1(a)(2), 1(a)(3), 1(a)(4), 1(c), 1(d), 1(h), 1(i) and 1(j) of the Amended Statement of Claim are dismissed.
[23] The above amendment has the effect of reinstating the Appellants' claims for relief for statutory oppression pursuant to subsection 248(3) of the OBCA (excluding claims for relief in the other paragraphs of the Amended Statement of Claim that the Motion Judge dismissed). To be clear, this amendment to the Order does not permit the Appellants to claim compensatory damages or damages at large for statutory oppression pursuant to subsection 248(3) of the OBCA.
iii. Did the Motion Judge err in failing to find that a breach of s. 248 of the OBCA can and should attract damages at large or punitive, aggravated and exemplary damages?
[24] In addressing Issue 1, we have already rejected the Appellants submission that they are entitled to claim damages for statutory oppression without proving that the damages were caused by the oppressive conduct. In our view, the words in section 248(2) of the OBCA, giving the court the power to "rectify the matters complained of" do not affect the issue of causation when considering a claim for damages, either direct or at large.
[25] With respect to the Appellants claim for punitive, aggravated and exemplary damages in paragraph 1(k) of the Amended Statement of Claim, that claim was not struck by the Motions Judge and remains.
Conclusion
[26] For the foregoing reasons, therefore, and subject to the above noted amendment to the Order, the appeal is dismissed.
[27] The parties have agreed that the successful party should be awarded costs of the appeal in the all-inclusive amount of $10,000. In our view, that is fair and reasonable given the issues raised. Accordingly, the Respondents are entitled to costs of the appeal fixed at $10,000 in total.
[28] Counsel advised that an amount of approximately $7,500 was paid into court by the Appellants as security for costs. We therefore order that the amount paid into court as security for costs be paid out of court to the Respondents, and that the Appellants pay to the Respondents within 30 days an additional amount for costs calculated as the difference between $10,000 and the amount paid out of court.
Kiteley J.
L. A. Pattillo J.
P. Cavanagh J.
Released: January 26, 2018
CITATION: Ciup v. Weinreb, 2018 ONSC 639
DIVISIONAL COURT FILE NO.: 147/17
DATE: 20180126
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
KITELEY, PATTILLO AND CAVANAGH JJ.
BETWEEN:
LAURENT CIUP and ERIC MESSIKA, also known as Eric Chaim Messika Appellants/ (Plaintiffs)
– and –
YISROEL WEINREB, ANTHONY HELLER, HELMSBRIDGE HOLDINGS LIMITED, EZRIEL YEHUDA GESTETNER and E MOBILE INC. Respondents/ Defendants
REASONS FOR JUDGMENT
Released: January 26, 2018