COURT FILE NOS.: CV-21-00669891-0000 CV -21-00672956-0000 DATE: 20230623 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
MOHAMMAD ALI EKSIR Applicant – and – MOHAMMAD HAMED YOUSUFZAY and 1898692 ONTARIO INC. Respondents
Rebecca Huang and Zina Rita, for the Applicant Elliot Birnboim and Michael Crampton, for the Respondent Mohammad Hamed Yousufzay
BETWEEN: MOHAMMAD HAMED YOUSUFZAY Applicant – and – MOHAMMAD ALI EKSIR and 1898692 ONTARIO INC. Respondents
Elliot Birnboim and Michael Crampton, for the Applicant Rebecca Huang and Zina Rita, for the Respondent Mohammad Ali Eksir
HEARD: November 1-3, 2022
VERMETTE J.
[1] Mohammad Ali Eksir and Mohammad Hamed Yousufzay are both shareholders and directors of 1898692 Ontario Inc. (“United Investment”). Mr. Eksir owns 40% of the shares of United Investment and Mr. Yousufzay owns 60% of the shares.
[2] On October 7, 2021, Mr. Eksir commenced his Application against Mr. Yousufzay and United Investment. He asks for various relief, including a declaration that Mr. Yousufzay has used his powers as an officer and director of United Investment in a manner that is oppressive, unfairly prejudicial to or that unfairly disregards the interests of Mr. Eksir, contrary to section 248 of the Business Corporations Act, R.S.O. 1990, c. B.16 (“OBCA”), and an order winding up United Investment.
[3] On November 30, 2021, Mr. Yousufzay commenced his own Application against Mr. Eksir and United Investment. Mr. Yousufzay asks for the following relief:
a. an order pursuant to subsections 106(1) and (2) of the OBCA requiring a shareholder meeting and dispensing with the requirement for a quorum of the number of shareholders required by United Investment’s By-Laws; and
b. an order that Mr. Eksir produce all of United Investment’s financial records in his possession, including original receipts, invoices, bank statements, cancelled cheques and other material necessary to obtain annual audited financial statements.
[4] On December 14, 2021, Justice Glustein ordered that the two Applications be heard together on a summary trial. The summary trial proceeded before me.
[5] After considering all the evidence before me, I dismiss Mr. Eksir’s Application and grant Mr. Yousufzay’s Application.
A. FACTUAL BACKGROUND
1. The parties and Nipash Auto Sales
[6] Mr. Eksir was born in Iran. He immigrated to Canada in 1994. In 1978, he completed a Ph.D. in architecture in Florence, Italy. Prior to immigrating in Canada, he lived in the United States of America where he operated a renovation business with a number of people, including his brother. He was 69 years old at the time of trial.
[7] Mr. Eksir operates 1440825 Ontario Inc. which operates as a used car dealership under the name of Nipash Auto Sales (“Nipash”). Mr. Eksir’s wife, Sholeh Nasouti, acts as bookkeeper and comptroller of Nipash.
[8] In October 2008, Mr. Eksir hired Mr. Yousufzay as a salesman for Nipash. At that time, Nipash was involved in both wholesale and retail sale of used vehicles. Mr. Yousufzay was subsequently promoted to Manager of Nipash.
[9] In 2012, Mr. Eksir and Mr. Yousufzay had discussions about Mr. Yousufzay purchasing 90% of the shares of Nipash. The terms of a letter of intent were discussed.
[10] In 2012, Mr. Eksir hired Mr. Yousufzay’s brother, Mr. Muhammad Walid, as a salesman for Nipash. Mr. Walid had known Mr. Eksir since approximately 2004 as they were both active in the used car retail industry. Mr. Walid’s evidence is that his duties at Nipash expanded over the years and he became intimately involved in all aspects of Nipash’s retail operation. Mr. Walid stopped working for Nipash in December 2020. There is a dispute as to whether he resigned in January 2021 or was dismissed by Nipash.
[11] In 2013, Nipash moved to larger premises located at 310 Queen Street East, Brampton (the “Property”). Nipash became the main tenant at the Property. Nipash signed a lease agreement with the then owner of the Property, Lenco Investments Limited (“Lenco”). Nipash’s lease agreement included a right of first refusal with respect to the sale of the Property.
2. United Investment
[12] Both Mr. Yousufzay and Mr. Eksir are founding shareholders of United Investment. United Investment was incorporated on April 23, 2014. Its articles of incorporation indicate that the minimum number of directors is three. Mr. Yousufzay holds 60% of the shares in United Investment and Mr. Eksir holds 40% of the shares. Mr. Eksir and Mr. Yousufzay have been directors of United Investment since its incorporation. On January 15, 2015, Mr. Yousufzay was appointed as President and Treasurer of United Investment, and Mr. Eksir was appointed as Vice-President and Secretary.
[13] While a third person was very briefly involved in United Investment after it was incorporated, Mr. Eksir and Mr. Yousufzay have been the only two shareholders and directors of United Investment since March 2015. They do not have a shareholders’ agreement.
[14] Ms. Nasouti has acted as United Investment’s bookkeeper. While Mr. Eksir stated in his affidavit that his wife never held any position with United Investment, he acknowledged that she assisted with its monthly bookkeeping and quarterly HST filings. He stated during his cross-examination that he had no personal knowledge of what his wife was doing at United Investment or Nipash.
[15] In contrast, Mr. Yousufzay’s evidence is that Ms. Nasouti did not just assist United Investment with its monthly bookkeeping and quarterly HST filings. He stated that she, and she alone, attended to all financial record-keeping for United Investment and was in fact United Investment’s comptroller. He further stated that she kept meticulous and detailed financial records and gave him instructions.
[16] According to Mr. Yousufzay, while United Investment’s financial records were kept at the Property up until March 2018, Ms. Nasouti started keeping all of the financial records at her and Mr. Eksir’s home after March 2018. As a result, after the breakdown of the relationship between Mr. Eksir and Mr. Yousufzay, Mr. Yousufzay did not have any of the financial records of United Investment for the period subsequent to March 2018. Electronic copies of financial records were provided to Mr. Yousufzay’s counsel on January 25, 2022.
3. Purchase of the Property by United Investment
[17] In early 2015, Lenco sought to sell the Property. Nipash exercised its right of first refusal by entering into an Agreement of Purchase and Sale with Lenco dated January 23, 2015 for the price of $3,660,126.00. Nipash subsequently assigned the Agreement of Purchase and Sale to United Investment.
[18] The down payment for the Property was $1,300,000.00. Mr. Eksir contributed $780,000.00 towards this amount with four cheques from Nipash’s bank account. Mr. Yousufzay contributed $690,000.00. These loans have been repaid by United Investment, as confirmed in United Investment’s financial statements for the year ending March 31, 2019.
[19] On March 2, 2015, United Investment acquired the Property for $3,660,126.00, with a mortgage of $2,379,080.00 from BCU Financial/Buduchnist Credit Union Limited. Before acquiring the Property, United Investment did not have any substantial assets and did not carry-on business activities.
[20] The Property consists of approximately 2.05 acres in downtown Brampton with a building of approximately 15,800 square feet of indoor space. Until October 31, 2021, Nipash was the main tenant of United Investment. It occupied the bulk of the space and was allocated the majority of the outdoor space for the used car lot. There were four other smaller tenants, including a car rental company and some small auto repair shops.
4. Witnesses at trial
[21] Mr. Eksir provided affidavit evidence and was cross-examined at trial. His only other witness was Robert Fowlie. Mr. Fowlie is a Certified Professional Accountant, Certified Fraud Examiner and a Partner with MNP LLP in downtown Toronto. He was retained by counsel for Mr. Eksir to provide forensic accounting services in relation to Mr. Eksir’s Application. He was qualified at trial as an expert in investigative forensic accounting. Mr. Fowlie prepared a report, which was attached to his affidavit, and was cross-examined at trial.
[22] Mr. Yousufzay also provided affidavit evidence and was cross-examined at trial. He relied on the evidence of the following witnesses:
a. Mr. Walid, who swore an affidavit and was cross-examined at trial.
b. Abdul Amirzadah, who swore an affidavit and was cross-examined at trial. Mr. Amirzadah is the nephew of Mr. Yousufzay and Mr. Walid. He was employed by Nipash as a used car salesman from 2014 until the end of October 2021, when Nipash ceased carrying on business at the Property. Mr. Amirzadah has also been a tenant of United Investment since 2016. He operates a small auto mechanic shop from one of the rental units at the Property.
c. Nasrulla Mohammed, who swore an affidavit and was cross-examined at trial. Mr. Mohammed operated an auto mechanic repair shop which was a tenant of United Investment at the Property from September 2015 to August 2017. He was subsequently employed by Nipash as a mechanic from the summer of 2019 until he was laid off in the spring of 2021.
d. Josyf Pelech, who swore an affidavit. He was not cross-examined on his affidavit at trial. Mr. Pelech used to be the branch manager at the Rathburn branch of BCU Financial. He acted in that capacity from the purchase of the Property in 2015 until November 2021. BCU Financial was the first mortgage lender which financed the purchase and subsequent refinancing of the Property for United Investment. BCU Financial also extended a line of credit to United Investment and acted as its bankers.
5. Running of United Investment
[23] United Investment earns rental income from its commercial tenants at the Property. It does not have any other business activity or substantial asset. It operated from Nipash’s office at the Property.
[24] Mr. Eksir and Mr. Yousufzay agreed early on that Mr. Yousufzay would oversee the management of the Property at the same time as he was working for Nipash. Mr. Eksir stated that he was not expecting any operational role at United Investment.
[25] Mr. Yousufzay’s work for United Investment included collecting rents, dealing with complaints, locating new tenants as needed, arranging for everyday repairs (e.g., roofing and plumbing), arranging for cleaning, insurance and landscaping, paying utilities, and other matters.
[26] Both Mr. Yousufsay and Mr. Eksir had signing authority over United Investment’s bank account. Mr. Eksir stated in his affidavit that he had never issued any cheques from United Investment’s accounts and that his signature was never needed or required.
[27] According to Mr. Yousufzay, Mr. Eksir and his wife instructed and supervised the preparation of United Investment’s financial statements by Mr. Eksir’s accountant, Mr. Tony Baksh.
[28] Mr. Eksir is the authorized signing officer of United Investment on United Investment’s tax returns. He stated during his cross-examination that he was not involved in the preparation of United Investment’s tax returns and he did not review them.
[29] Aside from a limited number of text messages, there are no written communications between Mr. Yousufszay and Mr. Eksir in the record before me. Mr. Eksir does not use e-mails. Mr. Yousufzay’s evidence is that he did not do anything at United Investment without Mr. Eksir’s knowledge and authorization. He stated that everything was discussed during Mr. Eksir’s regular visits at Nipash’s office.
[30] Because of the close connection between Nipash and United Investment, it was common for funds to flow back and forth as needed between the two entities. According to Mr. Yousufzay, these transfers included frequent amounts from United Investment to Nipash to fund the purchase of automobiles for Nipash. For example, there were payments from United Investment to Nipash totaling more than $1 million between October 2015 and May 2018. There were also three $50,000 payments from United Investment to Nipash in December 2019.
[31] Mr. Eksir disagrees with Mr. Yousufzay’s characterization of the transfers. He stated that Nipash lent money to United Investment and that the cheques from United Investment to Nipash that were referred to by Mr. Yousufzay were repayments for the loans that Nipash had made to United Investment.
[32] A review of the cheques and the bank statements of United Investment show loans going back and forth between Nipash and United Investment. I also note that the bank statements for United Investment include pre-authorized debit transactions that appear to be related to Nipash’s business, such as pre-authorized debit transactions with Honda Finance and Acura Finance.
[33] There is contradictory evidence before me as to how often Mr. Eksir attended at Nipash’s office/the Property. Mr. Eksir indicated that he experienced some medical issues in February 2016. He stated the following in his affidavit:
I have had very little involvement in the day-to-day management of United Investment. In addition, I was not consistently physically present at the Property from 2016 to early 2019 due to my aforementioned health issues I was experiencing. Again, for privacy reasons, I do not discuss the details of my health issues here. I only occasionally visited the Property during those years and was not capable of close supervision.
[34] Mr. Yousufzay disagrees with this description of Mr. Eksir’s involvement. According to Mr. Yousufzay, whatever medical issues Mr. Eksir had did not prevent him from attending at the Property at least weekly. Mr. Yousufzay stated as follows in his affidavit:
Although [Mr. Eksir] had some health issues, it is not true that he was ever prevented from continuing close supervision of all of the financial affairs of Nipash Auto and United Investment. [Mr. Eksir] regularly attended at the premises and inspected the books and records and he continued to be intimately familiar with all dealings of the company and all remuneration paid to me, both directly or indirectly. He continued his operation of the wholesale business of Nipash Auto. I regularly advised him of all significant issues concerning United Investment, such as, for example, emergency roof repairs. I did so by text messages as [Mr. Eksir] does not have an email address. All transactions were authorized by [Mr. Eksir] and all cash advances and all charitable donations were approved by [Mr. Eksir]. [Ms.] Nasouti meticulously recorded every transaction, every cheque, and every invoice, and often queried me for details of every expense to the penny.
[35] Mr. Walid gave the following evidence as to how frequently Mr. Eksir and Ms. Nasouti attended at the Property:
Initially [Mr. Eksir] attended at the premises only somewhat irregularly as he was looking after wholesale operations only. In 2013, when we moved to 310 Queen Street East, [Mr. Eksir] attended more regularly, approximately two times per week. That continued without interruption until approximately 2019, when [Mr. Eksir] started attending every day.
During his twice weekly attendances he would meet with my brother, [Mr. Yousufzay], for one or two hours in the private offices of Nipash Auto Sales and United Investment, both at 310 Queen Street East, or go out to a neighbourhood coffee shop or restaurant.
[Mr. Eksir’s] wife, Sholeh Nasouti, acted as bookkeeper and comptroller of Nipash Auto Sales. She attended regularly and consistently about once a week, usually on a Friday. She was intimately familiar with all of the financial transactions and records of Nipash Auto Sales and frequently had occasion to question me and require explanations for any particular transaction. She would do so in person when attending at the offices but also frequently telephoned me or text messaged me from her home throughout the week. As examples of the detailed involvement she had in the business, I attach as Exhibit “A” hereto copies of text messages between us concerning the financial records.
[36] Mr. Amirzadah also gave evidence regarding how frequently Mr. Eksir and Ms. Nasouti attended at the Property. He stated the following in his affidavit:
For most of my time at the 310 Queens Street property I was aware that Ali Eksir and Sholeh Nasouti came to the property two to four times per month, usually together. They went to the upstairs offices where the records for Nipash Auto Sales were kept and they were usually on the premises for two or three hours at a time. While there they would frequently summon [Mr. Yousufzay] to the offices.
In 2019 Ali Eksir and Sholeh Nasouti started coming more regularly, about weekly and in 2020 they started coming every day.
[37] Mr. Pelech also gave relevant evidence on this point. In his capacity as the manager for BCU Financial, Mr. Pelech frequently met with both Mr. Eksir and Mr. Yousufzay. He attended at the offices of United Investment at the Property every two to three months up until the onset of the COVID-19 pandemic in 2020. He stated the following about his visits:
On all of those visits I met with both [Mr. Yousufzay] and [Mr. Eksir]. It was clear to me from those frequent and detailed discussions with them that they had an equal understanding of the operation of and financial affairs of United Investment.
During those visits it was [Mr. Eksir] who did most of the talking as he had a much better command of the English language than did [Mr. Yousufzay].
[38] During his cross-examination, Mr. Eksir stated that he went to the office of Nipash/United Investment once or twice a month before 2019, two to four times a month in 2019 and more frequently in 2020. He agreed that his wife attended at the Property once a week to deal with the bookkeeping of both Nipash and United Investment. However, he pointed out that except for rent and utility bills, there were not a lot of transactions to deal with regarding United Investment.
6. United Investment’s financial statements
[39] On January 15, 2015, pursuant to section 148 of the OBCA, United Investment’s shareholders signed a consent to the exemption of the corporation from the audit provisions of the OBCA.
[40] United Investment’s accountants prepared different types of financial statements over the years:
a. year ending March 31, 2016 – review;
b. year ending March 31, 2017 – audit;
c. year ending March 31, 218 – notice to reader;
d. year ending March 31, 2019 – notice to reader;
e. year ending March 31, 2020 – review.
7. Falling out between Mr. Eksir and Mr. Yousufzay
[41] In the second half of January 2021, Mr. Yousufzay and Mr. Eksir signed a letter of intent with respect to the sale of all the shares of Nipash to Mr. Yousufzay (“2021 Letter of Intent”). The anticipated closing for the sale of the shares of Nipash was March 31, 2021. The 2021 Letter of Intent also included a section regarding United Investment which contemplated one party purchasing the other party’s shares or the sale of the Property.
[42] There was a falling out between Mr. Yousufzay and Mr. Eksir shortly after the 2021 Letter of Intent was signed.
[43] Mr. Eksir stated in his affidavit that in late 2020 through early 2021, he noticed numerous transactions on Nipash’s credit card that did not appear to relate to Nipash’s business, but, instead, appeared to be for Mr. Yousufzay’s personal interests. Mr. Yousufzay’s employment with Nipash was subsequently terminated, and Nipash commenced a civil fraud claim against Mr. Yousufzay and Mr. Walid in April 2021. Mr. Yousufzay and Mr. Walid have both defended the claim. Mr. Yousufzay asserted a counterclaim against Nipash for wrongful dismissal, and Mr. Walid asserted a counterclaim for the payment of commission earned. Nipash has defended the counterclaims.
[44] According to Mr. Yousufzay, the falling out between the parties arose from hard bargaining between the parties over the final terms of the sale of the shares. He stated that the allegations of financial misconduct against him and his brother were false.
[45] The issues regarding Nipash are not before me.
[46] Mr. Eksir explained that his findings in relation to Nipash made him take a closer look at the financials of United Investment in late 2020 and early 2021. During his review, he identified a few transactions with which he takes issue and that were raised in this litigation (“Impugned Transactions”). These transactions are discussed below.
8. Impugned Transactions
[47] The evidence regarding the Impugned Transactions is reviewed below, including the evidence of Mr. Fowlie. Before discussing the Impugned Transactions, it is helpful to review the scope of Mr. Fowlie’s report.
a. Mr. Fowlie’s expert report
[48] Mr. Fowlie prepared a report dated February 17, 2022. He was asked by counsel for Mr. Eksir to review the following allegations:
a. interest free loans to Mr. Yousufzay and his brother that remain outstanding;
b. donation payments made to Mr. Yousufzay’s mosque and his children’s school, unrelated to the business; and
c. payment of renovation costs unrelated to the Property.
[49] Mr. Fowlie did not review other transactions with respect to United Investment.
[50] Mr. Fowlie prepared a list of documents to be requested from Mr. Yousufzay and United Investment and he reviewed and analyzed the documents that were provided.
[51] Mr. Fowlie’s report lists the following limitations:
We did not interview either Mr. Yousufzay, Mr. Eksir or his spouse, Sholeh Nasouti.
We requested, but did not receive the following relevant information:
- Complete copies of the T2 Corporate Income Tax Returns filed for United Investment for the fiscal years ending March 31, 2015 to 2021, excluding 2018;
- Tax documents, such as a T4 Statement of Remuneration Paid for employees, including Mr. Yousufzay, for the fiscal years ended March 31, 2015 to present date;
- Loan agreement between United Investment and Mr. Yousufzay’s brother regarding the $100,000 loan in 2019;
- Various copies of cheques in relation to the allegations discussed;
- Donation receipts, correspondence, or any other documentation regarding the payments made to UM Mosque, Noon Academy, and Nabawl Mosque; and,
- Photographic evidence of the renovation and building/land improvements completed on the Property.
We have not independently verified the information provided to us. We reserve the right to review all calculations included or referred to in our report and, if we consider it necessary, to revise our calculations in light of any new information which becomes known to us after the date of the report.
b. Loan to Mr. Walid
[52] On July 7, 2019, Mr. Walid obtained a loan in the amount of $100,000 from United Investment. The cheque to Mr. Walid was signed by Mr. Yousufzay and included the word “Loan” in the Re line. However, no documentation was prepared in relation to the loan. Mr. Eksir’s evidence is that the loan was granted without his awareness or approval. After finding out about the loan, Mr. Eksir instructed United Investment’s bookkeeper, i.e., his wife, to issue a T4A to Mr. Walid. Ms. Nasouti sent the following letter to Mr. Walid on March 22, 2021:
The attached T4A represents a taxable benefit for 2020 on the interest free loan of $100,000 from United Investment issued in July 2019, as proscribed [sic] by the Canada Revenue Agency.
Please include this amount in your 2020 Income Tax Return. If your return has already been filled [sic], please ask the Canada Revenue Agency or your accountant to request an adjustment.
[53] Mr. Yousufzay’s evidence is that the $100,000 loan to Mr. Walid was made with the express consent and approval of Mr. Eksir, and that the loan was repaid in full on December 31, 2019. Mr. Yousufzay attached to his affidavit a bank draft to United Investment dated December 31, 2019 in the amount of $150,000, and he indicated that the additional $50,000 represented the partial repayment of a loan that had been made to him with Mr. Eksir’s knowledge and consent.
[54] Mr. Walid’s evidence is that he borrowed $100,000 from United Investment in 2019, but he was advised by Mr. Eksir in December 2019 that the loan had to be repaid because an inspection by OMVIC (Ontario Motor Vehicle Industry Council) was expected. As Mr. Walid did not have the money to repay the loan at that time, Mr. Yousufzay made the repayment for him from his personal line of credit.
[55] Mr. Fowlie noted in his report that the $150,000 payment referred to by Mr. Yousufzay was recorded in United Investment’s general ledger for fiscal year 2020 as a payment of Mr. Yousufzay’s shareholder receivable balance at the time, and not as a repayment of the loan to Mr. Walid. As a result of the $150,000 payment, Mr. Yousufzay’s shareholder balance went from being a receivable of $133,004 to a payable of $16,996 (i.e., he paid more than what he owed). Mr. Fowlie also noted that the $100,000 loan to Mr. Walid was still recorded as an account receivable in the financial statements of United Investment for the years ended March 31, 2020 and March 31, 2021.
[56] With respect to the $100,000 loan to Mr. Walid, Mr. Fowlie stated that Mr. Yousufzay appeared to have conveyed the benefit of an interest-free loan to his brother, resulting in a loss of interest income to the detriment of United Investment. He also stated that the loan appeared to be unsecured and without repayment terms, putting United Investment at a risk of loss without security should Mr. Walid decide not to repay the loan.
c. Shareholder loan to Mr. Yousufzay
[57] In 2020, Mr. Yousufzay received $24,000 from United Investment which was categorized as a shareholder loan:
a. On June 6, 2020, Mr. Yousufzay signed a cheque to himself in the amount of $16,000. The word “Loan” appears in the Re line.
b. On September 19, 2020, Mr. Yousufzay signed a cheque to himself in the amount of $8,000. The word “Loan” appears in the Re line.
[58] No documentation was prepared in relation to this loan. Mr. Yousufzay acknowledged this loan and that it was without interest, but he stated that it was not true that this loan was done without Mr. Eksir’s knowledge and approval. Mr. Yousufzay’s evidence is that the loans and payment of personal expenses by United Investment “constitute meager compensation for my service and most importantly, were done with the knowledge of, and indeed the encouragement of” Mr. Eksir.
[59] As of March 2022, this loan had not been repaid.
[60] Mr. Fowlie noted in his report that these two transactions ($16,000 and $8,000 loans) increased Mr. Yousufzay’s shareholder receivable balance by $24,000 and were recorded as part of the Accounts Receivable account on the balance sheet of United Investment for the year ended March 31, 2021.
[61] With respect to the $24,000 loan to Mr. Yousufzay, Mr. Fowlie noted that Mr. Yousufzay appeared to have conveyed the benefit of an interest-free loan to himself, resulting in a loss of interest income to the detriment of United Investment. However, Mr. Fowlie admitted in cross-examination that: (a) shareholder loans are common in privately-held corporations: and (b) it is common that no interest would be charged on such loans, although he did not know the expectations of the parties in this particular case.
d. Donations
[62] In 2015, $5,000.00 was donated by United Investment to the Ummah Mabawiah Masjid (“UM Mosque”), which is Mr. Yousufzay’s place of worship, in five $1,000 increments. On June 19, 2018, United Investment made another donation to the UM Mosque in the amount of $2,000.
[63] In 2016, $5,500.00 was donated by United Investment to Noon Academy, which is the school of Mr. Yousufzay’s children. On February 15, 2019, United Investment made another donation to Noon Academy in the amount of $1,000. The February 15, 2019 cheque appears to be signed by Mr. Eksir. The record before me also includes a Nipash cheque to Noon Academy dated December 5, 2014 in the amount of $315.00 that also appears to be signed by Mr. Eksir.
[64] In 2016, United Investment donated $1,000 to another mosque known as Nabawl Mosque.
[65] Mr. Yousufzay’s evidence is that the donations were done with Mr. Eksir’s knowledge. He pointed out that Mr. Eksir signed cheques to Noon Academy, and he stated that the donations to the mosques were specifically authorized by Mr. Eksir.
[66] In his Reply Affidavit, Mr. Eksir stated that the signatures on the cheques to Noon Academy were not his signature. During his cross-examination, he stated that he was not in Canada at the time the February 15, 2019 cheque was signed.
[67] Mr. Fowlie noted in his report that there were inconsistencies as to how the payments referred to above were classified (e.g., donations, business development expenses) in United Investment’s internal income statements, external income statements and tax returns.
e. Home renovation expenses
[68] Mr. Yousufzay used $71,991.00 of United Investment’s money to renovate his own home in 2017 and 2019.
[69] The relevant invoices for the home renovations were addressed to United Investment and/or to the business address of the Property.
[70] Mr. Yousufzay’s evidence is that these expenses were paid by United Investment at the suggestion of Mr. Eksir, and with his knowledge and agreement. He stated during his cross-examination that the invoices were prepared the way they were pursuant to the advice of Tony Baksh, United Investment’s accountant. He further stated that he gave the invoices to Ms. Nasouti when they were received in 2017, that she tracked every expense, and that Mr. Eksir and his wife always had all of the records/invoices related to the renovations. Mr. Yousufzay pointed out that the handwritten notations on each invoice were made by Ms. Nasouti back in 2017 when she indicated the number of the cheque that was used to pay the invoice. Mr. Yousufzay also mentioned that Mr. Eksir and his wife visited him at his new house and they inspected the work described in the invoices.
[71] In his Reply Affidavit, Mr. Eksir stated that he did not have knowledge of, nor consented to, approved or authorized the payments made by Mr. Yousufzay from United Investment’s account for his personal benefit.
[72] Mr. Fowlie noted in his report that the home renovation expenses had three different treatments in United Investment’s general ledgers:
a. Some transactions were treated as personal expenditures of the shareholder and recorded as an increase in the shareholder receivable balance from Mr. Yousufzay (total of $23,232).
b. Some transactions were treated as business expenditures and flowed through to United Investment’s income statement for the respective fiscal year (total of $4,093).
c. Some transactions were classified as an addition to land or building of United Investment (total of $36,310).
[73] Mr. Fowlie stated the following with respect to these expenses:
a. All of the expenditures would be expected to be treated as a shareholder loan and increase the shareholder receivable balance from Mr. Yousufzay. Utilizing business funds to pay for Mr. Yousufzay’s personal renovations was a shareholder loan transaction to be repaid to United Investment and not amounts to be included in the determination of the Net Income and Taxable Income of United Investment. As a result, United Investment was at a risk of loss related to interest and penalties that Canada Revenue Agency could levy against United Investment should it reassess the Corporate tax returns for these expenses.
b. If the payments were for Mr. Yousufzay’s service, the payments for renovations on his personal residence would put United Investment at the risk of loss related to interest and penalties that Canada Revenue Agency could levy for failing to report the transactions as compensation to Mr. Yousufzay and failing to withhold taxes at source for these payments.
c. The amount of HST recoverable by United Investment in a given year was overstated by these transactions and, as a result, United Investment had likely under remitted the amount of HST it owed to Canada Revenue Agency. As a result, United Investment was at a risk of loss related to interest and penalties that Canada Revenue Agency could levy against United Investment should they reassess the HST returns.
f. Snow clearing expenses
[74] In early 2019, Mr. Eksir discovered that Mr. Yousufzay used funds of United Investment to reimburse himself for clearing snow on the Property. Mr. Yousufzay wrote two cheques to himself which were indicated to be for plowing snow for five months at the Property: one cheque on December 5, 2018 in the amount of $5,250 and one cheque on November 15, 2019 in the amount of $10,000. Nipash was the owner of the snow clearing truck that was used on the Property at the relevant time. It is Mr. Eksir’s position that two other Nipash employees, Mr. Amirzadah and Mr. Jashandeep S. Bhullar, cleared the snow on the Property the majority of the time as part of their work duties. There is no direct evidence of Mr. Bhullar before the Court. Mr. Amirzadah’s evidence is discussed below.
[75] Mr. Eksir explained as follows what he did after finding out about the payments related to snow clearing:
In 2019 I told Mr. Yousufzay that he could not pay himself for work that he had not done. Mr. Yousufzay did not repay the money he had paid himself for the snow clearing service he had not performed. I chose not to push the matter because I had just started to feel better, and Mr. Yousufzay had been in charge of both Nipash and United Investment during my absence as I was dealing with my health.
[76] Mr. Yousufzay’s evidence is that he personally did the snow plowing and that the funds he received came from the tenants who were invoiced for the snow plowing. He acknowledged that one employee of Nipash assisted in the snow plowing sometimes. Mr. Yousufzay noted that because of the nature of Nipash’s operation as a used car lot, every car in the lot had to be removed to facilitate the plowing and this was a major job.
[77] Mr. Mohammed gave evidence that when there was a snowfall, he saw the Property’s lot being plowed by Mr. Yousufzay. He did not recall anyone else operating the snowplow. Mr. Walid gave similar evidence in his affidavit.
[78] Mr. Amirzadah did not address the issue of snow plowing in his affidavit, and Mr. Eksir’s counsel did not ask him any questions on this point during the cross-examination.
g. Parties’ positions regarding the Impugned Transactions
[79] Mr. Yousufzay’s position is that Mr. Eksir and his wife were intimately familiar with every financial transaction of United Investment, no matter how small, and that nothing was done without their knowledge and authorization. He stated the following in his affidavit:
[Ms.] Nasouti was always regularly in attendance at the United Investment offices and her duties included supervising all receipts and expenses, bar none. Every expenditure was reviewed by her and all receipts, income and other such documents were provided to her on a weekly, if not daily, basis.
Further, although I was in charge of the day-to-day operations of United Investment (and Nipash Auto), it was [Mr. Eksir] and [Ms.] Nasouti, who were in total control of the overall finances and the fundamental issues, such as the corporation’s annual financial statements and tax filings, both of which required them to be intimately familiar with the corporation’s financial records. (An interesting example of the level of control Sholeh Nasouti had with United Investment is found at page 168 of [Mr. Eksir]’s Application Record. It is a letter written by Sholeh Nasouti in 2021 on the letterhead of United Investment sending out a T4A she created for $100,000.00. […])
Indeed [Mr. Eksir] insisted upon a $30,000.00 “management and support” fee being paid by United Investment to Nipash Auto each year for the work done by [Ms.] Nasouti managing all the financial records. Samples of such payments are documented below, in paragraph 43.
Further, [Mr. Eksir] retained his own personal accountant, Tony Baksh of JTS Tax & Accounting (who also acts for [Mr. Eksir]’s company, Nipash Auto) to act as accountant for United Investment. It is he, with [Mr. Eksir]’s assistance, who prepared all of the financial statements and all of the tax filings for United Investment. It is [Mr. Eksir] who is the contact person with CRA and it is he who reviewed and supervised all tax filings. As detailed below in this Affidavit, the evidence clearly demonstrate [sic] that [Mr. Eksir]’s claims of having no knowledge of the transactions described are untrue.
[80] Mr. Eksir’s position is that he had no knowledge whatsoever about the Impugned Transactions as he had put his trust in Mr. Yousufzay and was not involved in United Investment’s business. Mr. Eksir stated the following in his affidavit:
Given the above, I do not have any trust in Mr. Yousufzay’s character. Nor do I believe that it is possible for United Investment’s business to continue in the current state. I am therefore seeking a court order to wind up United Investment as a business.
9. 2021 correspondence
[81] On July 15, 2021, Mr. Yousufzay’s counsel sent two documents to Mr. Eksir:
a. a Notice of Dissent regarding the filing with Canada Revenue Agency of a 2020 T2 Corporation Tax Return for the period ending March 31, 2021 without the prior approval of United Investment’s board of directors; and
b. a Requisition of Shareholder Meeting requesting that United Investment hold a shareholder meeting as soon as possible to address the election of directors and the appointment of an accountant for United Investment.
[82] On July 20, 2021, Mr. Eksir’s lawyer sent a letter to Mr. Yousufzay’s lawyer which contained a proposal regarding the management of United Investment until the issues between the parties could be resolved. One of the points included in the proposal was that the financial statements of United Investment for the year ended March 31, 2021 were to be audited by a firm of chartered professional accountants to be agreed.
[83] Mr. Yousufzay’s lawyer responded on August 16, 2021. In his letter, Mr. Yousufzay’s lawyer pointed out, among other things, that the board of directors of United Investment was improperly constituted insofar as the number of directors was fewer than the minimum number of three directors prescribed by United Investment’s Articles of Incorporation. The letter indicated that Mr. Yousufzay proposed to fill the vacant director’s seat with his daughter, Husna Yousufzay. Husna Yousufzay was born in 2002 and graduated from high school in 2020. The letter also stated the following on the issue of United Investment’s accountants and financial statements:
Though never formally appointed, accounting services – including without limitation the preparation and filing of annual tax returns – are currently provided by B2E Accounting and Business Services (“B2E”), as represented by Tony Baksh and Sholeh Nasouti. Insofar as Ms. Nasouti is the spouse of Mr. Eksir, they do not operate at arm’s length from one another. In light of the ongoing dispute between our client and Mr. Eksir, it is unacceptable that B2E continue as the accountants of the Corporation. Our client has proposed that the Corporation retain the services of Platinum Tax and Accounting Prof. Corp. (“Platinum”), chartered professional accountants who operate at arm’s length from the parties.
Your proposal of a formal audit of the financial statements of the Corporation for the financial year ended March 31, 2021 would be prohibitively expensive for a company of this size. We propose that such financial statements be reviewed, either by Platinum or a similar firm of chartered professional accountants, at a more appropriate standard of review.
[84] On August 27, 2021, counsel for Mr. Eksir requested that an auditor be appointed by the directors and shareholders of United Investment to audit its financial records for 2014-2020, except for the fiscal year ending March 31, 2017.
[85] On September 7, 2021, counsel for Mr. Eksir sent a letter renewing the request for audited financial statements, but narrowing the request to the financial statements for the years ending March 31, 2018 through March 31, 2021. The September 7, 2021 letter also indicated that if Mr. Yousufzay proceeded to take steps to appoint his daughter as the third director of United Investment, Mr. Eksir would immediately commence an oppression application against Mr. Yousufzay and United Investment.
[86] On September 7, 2021, counsel for Mr. Yousufzay sent a Notice of Shareholder Meeting to counsel for Mr. Eksir which provided for a shareholder meeting to be held on September 20, 2021.
[87] On September 14, 2021, counsel for Mr. Eksir expressed the view that Mr. Yousufzay’s Notice of Shareholder Meeting was defective and invalid and asked that the September 20, 2021 meeting be vacated.
[88] On September 15, 2021, counsel for Mr. Eksir sent a letter to counsel for Mr. Yousufzay in which she advised that Mr. Eksir would not attend the shareholder meeting on September 20, 2021 and, as a result, the requisite quorum to proceed with the meeting under United Investment’s General By-Law No. 1 would not be met. [1]
[89] In a letter dated September 17, 2021, counsel for Mr. Eksir noted that the accounting firm previously suggested by Mr. Yousufzay (Platinum Tax and Accounting Prof. Corp.) could not conduct audit engagements. She proposed another accountant and accounting firm to audit United Investment for 2020 and 2021.
[90] On September 20, 2021, counsel for Mr. Yousufzay sent the following letter to counsel for Mr. Eksir:
Kindly find enclosed with this letter a copy of the meeting minutes from the Annual & Special Meeting of the Corporation’s shareholders held at our offices this morning (the “Meeting”). As a quorum of shareholders was not present at the Meeting, due entirely to your client’s decision not to attend, the Corporation was unable to transact the business required to inter alia: (a) elect the required number of directors to serve on the board of directors; and (b) the appointment of an auditor.
It is disappointing that your client decided not to attend to these matters of crucial importance. We hope that, taking into account the best interests of the Corporation, he will reconsider his approach. Accordingly, please note that the Meeting has been adjourned for a period of two weeks. The adjournment date, as duly approved pursuant to Section 7.6 of the Business Corporations Act (Ontario) (the “OBCA”), has been fixed at Monday, October 4th, 2021 at 10:00 a.m. (Toronto time) (the “Adjournment Date”).
Should your client decline to attend the Meeting on the Adjournment Date, and should the shareholders not otherwise bring the affairs of the Corporation into order by means of unanimous written resolution by such date, Mr. Yousufzay will commence an action pursuant to Section 106 of the OBCA to have a court call a meeting of the Corporation’s shareholders with the specific request that, pursuant to Section 106(2) of the OBCA, the quorum requirements of the Corporation's by-laws be “varied or dispensed with” at such meeting. [Emphasis in the original.]
[91] No shareholder meeting took place on October 4, 2021.
[92] On October 26, 2021, counsel for Mr. Yousufzay advised counsel for Mr. Eksir that Mr. Yousufzay was agreeable to using the accountant proposed by Mr. Eksir to do the audit, and that Mr. Yousufzay would cooperate fully.
[93] Ultimately, the accountant proposed by Mr. Eksir did not accept the engagement. He sent the following e-mail to the parties’ lawyers on October 29, 2021:
After considering this opportunity, we have decided to decline the appointment to be the corporation’s auditors. As the shareholders of the corporation are in litigation, we believe you should be pursuing a forensic audit of expenses, rather than an annual audit of the financial statements. The annual audit is designed to prepare financial statements in accordance with GAAP, and not to review the internal controls and transactions with an aim of identifying fraudulent or unapproved transactions.
[94] On November 8, 2021, counsel for Mr. Eksir sent an e-mail to counsel for Mr. Yousufzay indicating that they had been searching for a forensic auditor. They proposed two auditors “to review the internal controls and transactions with an aim of identifying any fraudulent or unapproved transactions.”
[95] Counsel for Mr. Yousufzay responded as follows on November 12, 2021:
It is necessary to have audited annual statements done because Mr. Eksir refuses to consent to waiving that requirement of the act. They are not, in fact, required other than to satisfy the technical requirements of the Act and it remains our understanding that Mr. Eksir and his wife are, and have been at all materials [sic] times, intimately familiar with every financial transaction of the firm. A forensic accountant would be pointless.
We also note that you have provided no estimate of the possible cost of a forensic accounting and in any event, for the moment at least, the corporation has no funds to pay such an expense.
We understand, however, that your client has sole control of all of the financial records of the corporation and, if he wishes to incur the expense of a forensic accountant to review those records, he is certainly free to do so.
[96] In October 2021, Nipash ceased being a tenant at the Property after the parties failed to agree to the amount of rent for the second term of the lease. In January 2022, United Investment and a new tenant signed an Agreement to Lease the premises previously occupied by Nipash starting on February 1, 2022.
[97] According to Mr. Yousufzay, Mr. Eksir has failed to respond to his communications sent in 2021 regarding the business of United Investment.
10. With prejudice offer dated September 21, 2022
[98] On September 21, 2022, Mr. Yousufzay made the following with prejudice offer to Mr. Eksir:
- The parties shall jointly retain a real estate appraiser to determine the current FMV [fair market value] of 310 Queen Street East, Brampton (the “Property”), which value shall be binding.
- The parties shall jointly retain a CBV [Chartered Business Valuator] to determine the current FMV of your client’s 40% interest in United Investment, which value shall be binding. As part of the CBV’s determination of FMV, a $215,491.00 liability (the full amount of your client’s allegation – or about a pre-tax $90,000 amount allocated to your share) to United Investment by our client shall be included as an asset of United Investment.
- Our client will purchase your client’s shareholding in United Investment at FMV within 60 days of the CBV issuing his report, structured with a view to optimizing tax efficiency in any transaction.
- If my client defaults on the purchase of your client’s shareholdings the Property shall be listed for sale and, upon closing of the Property’s sale, United Investment wound up. [Emphasis in the original.]
[99] This offer was not accepted. Mr. Eksir explained that he had lost his trust in Mr. Yousufzay, he did not want to have anything to do with Mr. Yousufzay, he was not willing to sell his shares to him, and he wanted the company to be wound up so that he could go his way and Mr. Yousufzay could go his way.
B. POSITIONS OF THE PARTIES
1. Position of Mr. Eksir
[100] Mr. Eksir states that United Investment was a partnership arrangement based on trust, with a corporate structure adopted for reasons of convenience. He argues that Mr. Yousufzay was dishonest over the years, engaging in self-dealing and treating United Investment as his own business. Mr. Eksir submits that the only just and equitable remedy is to wind up United Investment. According to Mr. Eksir, granting Mr. Yousufzay’s wish to continue the status quo, to appoint his daughter to the board of directors so that he can always outvote Mr. Eksir, or to force Mr. Eksir to sell his shares would be contrary to any reasonable expectation of the parties. Mr. Eksir notes that Mr. Yousufzay has not referred to any authority where a minority shareholder came to court for oppression and was forced to sell his shares.
[101] According to Mr. Eksir, he has four expectations in relation to United Investment: (1) he would receive audited financial statements; (2) Mr. Yousufzay would manage the affairs of United Investment with honesty and in good faith; (3) Mr. Yousufzay would honour the by-laws; and (4) United Investment would be wound up if the relationship between the two shareholders was completely broken due to the loss of trust. Mr. Eksir submits that that the evidence shows a clear case of Mr. Yousufzay using his power at United Investment in way that is oppressive, unfairly prejudicial to, and that unfairly disregards the interests of Mr. Eksir.
[102] With respect to financial statements, Mr. Eksir points out that section 148 of the OBCA imposes a statutory obligation for a corporation to provide shareholders with audited financial statements, unless all shareholders agree to waive it. He states that he requested audited financial statements as early as July 20, 2021 and that Mr. Yousufzay repeatedly rebuffed his request. His position is that his expectation of audited financial statements is reasonable and has been violated.
[103] With respect to the expectation that Mr. Yousufzay would manage the affairs of United Investment with honesty and in good faith, Mr. Eksir argues that Mr. Yousufzay has been dishonest and acted against the best interest of United Investment. He refers to the $100,000 loan to Mr. Walid, the $24,000 loan to Mr. Yousufzay and the home renovations paid by United Investment.
[104] With respect to the expectation of compliance with the by-laws, Mr. Eksir refers to provisions of United Investment’s by-laws regarding the fixing of remuneration. He points out that Mr. Yousufzay failed to give particulars with respect to any discussions that he alleged he had with Mr. Eksir where Mr. Eksir was informed of and gave consent to the Impugned Transactions.
[105] With respect to the expectation of winding-up, Mr. Eksir submits that his request for a wind-up order is supported by historical documents. He refers to a directors’ resolution dated January 15, 2015 and argues that this document shows that the parties turned their mind to the future possibility of a wind-up or dissolution of the corporation. He also refers to the 2021 Letter of Intent which mentions the possibility of the sale of the Property. Mr. Eksir notes that Mr. Yousufzay admitted at trial that there was never any agreement, whether written or oral, that one shareholder could be forced to sell his shares in United Investment to the other shareholder.
[106] Mr. Eksir states that Ontario courts have regularly issued wind-up orders in cases where a small privately held company was managed by a majority shareholder who had engaged in serious misconduct such as self-dealing, or where the shareholders of a small company had reached a deadlock and no longer trusted each other. Mr. Eksir notes that when the defendant shareholder or director engaged in self-dealing and serious financial misconduct, courts would wind up the company instead of forcing the minority shareholders who had been oppressed to sell the shares to the majority shareholder.
[107] Mr. Eksir submits that leave to commence a derivative action was not required in this case. He argues that in disputes involving closely held corporations with few shareholders, there is overlap between oppression claims and derivative actions and the two are not mutually exclusive.
[108] Mr. Eksir argues that Mr. Yousufzay’s and Mr. Walid’s evidence lacks credibility.
[109] Mr. Eksir submits that quorum was intended for consent, and that when unanimous consent cannot be obtained, the only solution is a wind-up. While Mr. Eksir does not take the position that United Investment should only have two directors while its articles of incorporation provide that it should have a minimum of three, its position is that United Investment should be wound up. Mr. Eksir states that, under section 248 of the OBCA, the Court has the power to fix the number of directors to two in a temporary fashion, and to require, also in a temporary fashion, that Mr. Eksir sign all cheques.
[110] Finally, Mr. Eksir states that Mr. Yousufzay’s argument based on abuse of process is without merit because Nipash’s fraud claim and Mr. Eksir’s oppression claim are completely different: they have different parties, causes of action and remedies.
2. Position of Mr. Yousufzay
[111] Mr. Yousufzay submits that in assessing whether there were reasonable expectations and whether oppression occurred, the Court should not perform a formal legalistic assessment. Rather, the Court must consider business realities.
[112] Mr. Yousufzay argues that approval vitiates any breach of reasonable expectations, and that the combination of knowledge and absence of complaint constitutes evidence of approval.
[113] With respect to Mr. Eksir’s alleged reasonable expectation of audited financial statements, Mr. Yousufzay points out that Mr. Eksir only made this request after the dispute emerged, that Mr. Yousufzay consented to the preparation of audited financial statements, and that nothing prevented Mr. Eksir from instructing his accountant to prepare audited statements. Mr. Yousufzay submits that such a disingenuous complaint on the part of Mr. Eksir suggests an ex post facto attempt to manufacture complaints.
[114] Mr. Yousufzay argues that Mr. Eksir’s knowledge of the Impugned Transactions may be inferred from the evidence, including from: (a) the fact that Mr. Eksir is a sophisticated professional; (b) the limited instructions given to Mr. Fowlie and the fact that Mr. Eksir knew about the Impugned Transactions before retaining Mr. Fowlie; (c) the history of taking shareholder loans without interest; (d) the fact that Mr. Eksir signed cheques to Noon Academy; (e) the fact that expenses were easy to spot on United Investment’s short bank statements; (f) the involvement of his wife and accountant who would see red flags; and (g) the fact that some of the renovation expenses were allocated to Mr. Yousufzay’s shareholder loan and that everyone knew that there were no renovations at United Investment’s office.
[115] Mr. Yousufzay submits that the conduct complained of by Mr. Eksir is not oppressive, is not unfairly prejudicial to, and does not unfairly disregards Mr. Eksir’s interests. He states that the conduct was not burdensome, harsh and wrongful and that there were no attempts to conceal anything. Mr. Yousufzay points out that Mr. Eksir has the burden of establishing that the alleged oppressive conduct caused him some harm. He argues that Mr. Eksir did not suffer any meaningful harm as his claims are derivative and de minimis. He also argues that there is little or no risk of loss with respect to his outstanding shareholder loan (if the $150,000 payment in December 2019 is treated as repayment of Mr. Walid’s loan). Mr. Yousufzay notes that Mr. Fowlie and Mr. Eksir did not attempt to quantify any impact on Mr. Eksir. According to Mr. Yousufzay, it would not be a fair resolution to destroy the company for unquantified de minimis impact on a shareholder.
[116] Mr. Yousufzay refers to case law that states that where relief is justified to correct an oppressive type of situation, the surgery should be done with a scalpel, not a battle axe, and any order should go no further than necessary to correct the injustice or unfairness between the parties.
[117] Mr. Yousufzay submits that nothing can be inferred from the reference to a wind-up in the January 2015 director’s resolution and the reference to a sale of the Property in the 2021 Letter of Intent.
[118] Mr. Yousufzay’s position is that Mr. Eksir’s Application is an abuse of process for three different reasons. First, Mr. Yousufzay expresses the view that Mr. Eksir is seeking a wind-up order in this case either to punish him or for leverage. He states that Mr. Eksir’s failure to accept his with prejudice offer dated September 21, 2022 suggests that Mr. Eksir has an ulterior purpose. Second, Mr. Yousufzay argues that Mr. Eksir should have sought leave to amend the action commenced by Nipash to add the claims made in this Application rather than starting multiple proceedings between the same parties and by-passing the test for leave to amend. Third, Mr. Yousufzay submits that Mr. Eksir’s Application is really a derivative action and that Mr. Eksir would not meet the test to bring a derivative action.
[119] With respect to the relief sought in his Application, Mr. Yousufzay relies on the case Ebrahim v. Continental Precious Minerals Inc., 2012 ONSC 2918. He states that while there is no legal deadlock, there is a practical one if Mr. Eksir refuses to attend meetings. He submits that it is the right of a majority shareholder to appoint directors. He notes that he does not seek to remove Mr. Eksir as a director, and that Mr. Eksir will still have a voice on the board of directors, even though Mr. Eksir’s evidence was that he did not want to be involved in the management of United Investment.
C. DISCUSSION
1. Mr. Eksir’s motion to strike paragraphs of affidavits
[120] Mr. Eksir brought a motion to strike numerous paragraphs in Mr. Yousufzay’s affidavits and in Mr. Walid’s affidavit. He also seeks to strike the affidavit of Mr. Pelech in its entirety.
[121] Before ruling on Mr. Eksir’s specific objections, I wish to refer to the following comments made by Justice Penny in 30 Bay ORC Holdings Inc. v. City of Toronto, 2021 ONSC 251, at para. 118 in relation to an objection that certain affidavit evidence was “speculative, irrelevant, non-expert ‘opinion’, ‘summary’ in nature or legal argument”. I find these comments apposite in the context of the objections raised by Mr. Eksir:
As to the City’s other complaints, I would say with some regret that it seems to be the rare affidavit these days that strictly adheres to the facts; attempts at argument, summarizing, spinning the facts, and drawing inferences is not at all uncommon. While in no way condoning this trend, the court is well aware of the difference between fact and argument and that the drawing of inferences is for the lawyers to argue and the court to decide, not the witnesses. While there is something to be said for the City’s concerns, the new evidence which falls into this category was not such as to have any material impact on the outcome. In the circumstances, I would treat the City’s objections under the second ground as going more to weight than admissibility.
[122] I also note that requests to strike paragraphs based on the grounds identified above often overreach as argument is frequently interspersed with admissible evidence. Given that this Court is well aware of the difference between fact and argument, there is no benefit in this Court trying to dissect in minute details the numerous paragraphs that Mr. Eksir is seeking to strike to parse the facts from the argument. Further, it is my view that Mr. Eksir is seeking to strike numerous paragraphs with respect to which there is nothing wrong.
[123] In light of the foregoing, I decline to strike paragraphs 3-7, 9-10, 12-13, 17, 20-21, [2] 23, 26, 28, 29, 32, 33, 34-36, 44, 45, 47, 51, 54 and 58 of the affidavit of Mr. Yousufzay sworn January 13, 2022.
[124] I also decline to strike paragraphs 5 and 6 of Mr. Yousufzay’s second affidavit sworn January 13, 2022.
[125] I similarly decline to strike paragraphs 6, 7, 8, [3] 9, 14 and 15 of Mr. Yousufzay’s affidavit sworn February 7, 2022.
[126] With respect to Mr. Walid’s affidavit sworn February 18, 2022, I decline to strike paragraphs 5-7, 13 and 15. The following passages are struck in paragraphs 11 and 12 because they constitute hearsay:
a. “and at one point described him to me as being like his older brother.” (paragraph 11);
b. “He told me that that $50,000.00 received by Auto Gallery Sales had been paid to Ali as a method for him to extract some money from United Investment and was not really a debt of Auto Gallery Sales.” (paragraph 12).
[127] There is no merit to Mr. Eksir’s request to strike Mr. Pelech’s affidavit.
2. Credibility of the witnesses
[128] Both Mr. Eksir and Mr. Yousufzay had a tendency to give unresponsive answers that were simply repeating the same points and their respective positions. However, it is possible that this tendency was, in part, the result of language comprehension issues – Mr. Eksir testified with the assistance of an interpreter and while Mr. Yousufzay decided to testify without an interpreter, his level of English was limited and he often had difficulty understanding the questions asked by counsel.
[129] Ultimately, I generally prefer Mr. Yousufzay’s evidence as it is more consistent with the entirety of the evidence before me. In particular, in light of all of the evidence, I do not accept Mr. Eksir’s evidence that he was not involved in United Investment and did not know anything about its operations and use of funds.
[130] In his affidavit, Mr. Eksir tried to downplay his involvement and the involvement of his wife in United Investment. This was contradicted by a number of witnesses who gave evidence that Mr. Eksir and Ms. Nasouti regularly attended at the Property where they spent a few hours reviewing records and discussing with Mr. Yousufzay. In my view, Mr. Eksir “adjusted” his evidence at trial in light of the other witnesses’ evidence on this point, which I found compelling.
[131] The fact that the other witnesses, notably Mr. Walid and Mr. Amirzadah, did not agree on the exact number of times per week or per month that Mr. Eksir was in the office does not lessen the weight that should be given to their evidence. It is not unusual that two witnesses may remember the same event differently, especially with the passage of time. I note that there are significant similarities between the evidence of Mr. Walid and Mr. Amirzadah (e.g., time spent in the office, discussions with Mr. Yousufzay, etc.). I also note that since Mr. Amirzadah was running another business at the Property, he may not have been in the office of Nipash/United Investment as consistently as Mr. Walid.
[132] In the end, I conclude based on the evidence that Mr. Eksir regularly attended at the office of Nipash/United Investment, at least once a week prior to 2019 and more frequently after that. I note that a number of the transactions challenged by Mr. Eksir took place in 2019 and 2020, including the $100,000 loan to Mr. Walid, the $24,000 loan to Mr. Yousufzay, one of the home renovation invoices and one of the cheques ($10,000) for plowing snow.
[133] The following also supports the conclusion that Mr. Eksir was more involved and knew more than he is acknowledging:
a. There were numerous transfers of funds between Nipash and United Investment.
b. Mr. Eksir is the authorized signing officer of United Investment on United Investment’s tax returns.
c. United Investment’s corporate profile report shows that Mr. Eksir filed annual returns for United Investment from 2015 to 2020.
d. Mr. Eksir was present each time that Mr. Pelech was visiting the Property every two to three months, and he had detailed discussions with Mr. Pelech regarding the operation and financial affairs of United Investment. Mr. Pelech has no interest in this litigation and, consequently, I give a lot of weight to his evidence.
e. After March 2018, United Investment’s financial records were kept at Mr. Eksir’s house, not in United Investment’s office.
f. Mr. Eksir’s wife was United Investment’s bookkeeper.
g. Mr. Eksir instructed his wife to issue a T4A to Mr. Walid in March 2021.
[134] In my view, Mr. Eksir’s assertion that Ms. Nasouti simply recorded transactions based on documents provided by Mr. Yousufzay and would not have been able to see “red flags” and advise him of such red flags is not credible. All cheques included a note stating what the payment was for. For example, the loans made to Mr. Walid and Mr. Yousufzay were clearly indicated on the cheques, as well as the payments to Mr. Yousufzay for snow plowing. Further, it would have been clear to someone who attended at the Property weekly that the invoices related to Mr. Yousufzay’s personal home renovations were not with respect to services provided at the Property. Ms. Nasouti did not have to be a forensic accountant to realize that. I also note that the evidence of several witnesses was that Mr. Eksir and Ms. Nasouti often attended at the Property together. In these circumstances, it is more probable than not that Ms. Nasouti would have mentioned an unusual expense to Mr. Eksir while they were in the office of Nipash/United Investment together.
[135] I find that an adverse inference should be drawn against Mr. Eksir for his failure to provide affidavit evidence from his wife. The Court of Appeal for Ontario stated the following in Parris v. Laidley, 2012 ONCA 755, at para. 2:
Drawing adverse inferences from failure to produce evidence is discretionary. The inference should not be drawn unless it is warranted in all the circumstances. What is required is a case-specific inquiry into the circumstances including, but not only, whether there was a legitimate explanation for failing to call the witness, whether the witness was within the exclusive control of the party against whom the adverse inference is sought to be drawn, or equally available to both parties, and whether the witness has key evidence to provide or is the best person to provide the evidence in issue.
[136] In this case, Ms. Nasouti was available to be called as a witness by Mr. Eksir. She attended the trial with Mr. Eksir. Being Mr. Eksir’s wife, she was not equally available to both parties. No explanation was provided as to why she did not provide evidence in support of her husband. This is perplexing given that she is mentioned numerous times in the affidavits filed by Mr. Yousufzay. She was United Investment’s bookkeeper and saw at the relevant time all the documentation that is now, years later, relied upon by Mr. Eksir as against Mr. Yousufzay. She would have key evidence regarding the various payments in issue, any discussions that took place at the time regarding the payments, the accounting treatment that was given to the payments, and any sharing of information with Mr. Eksir. For example, as noted by Mr. Fowlie, some of Mr. Yousufzay’s home renovation expenses were recorded as an increase in Mr. Yousufzay’s shareholder loan. This reflects knowledge that these expenses were personal expenses, and Ms. Nasouti would have been involved in the discussion and decision regarding the treatment of these expenses.
[137] I found the other witnesses generally credible.
[138] I now turn to the issue of oppression.
3. General principles regarding the oppression remedy
[139] Section 248 of the OBCA gives the court broad powers to remedy oppressive conduct in respect of a corporation. Subsection 248(2) states as follows:
Where, upon application under subsection (1), the court is satisfied that in respect of a corporation or any of its affiliates,
(a) any act or omission of the corporation or any of its affiliates effects or threatens to effect a result;
(b) the business or affairs of the corporation or any of its affiliates are, have been or are threatened to be carried on or conducted in a manner; or
(c) the powers of the directors of the corporation or any of its affiliates are, have been or are threatened to be exercised in a manner,
that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer of the corporation, the court may make an order to rectify the matters complained of.
[140] Oppression is an equitable remedy. It seeks to ensure fairness and what is just and equitable. It gives a court broad, equitable jurisdiction to enforce not only what is legal but what is fair. Therefore, courts considering claims for oppression should look at business realities, not merely narrow legalities. Given that oppression is fact-specific, conduct that may be oppressive in one situation may not be in another. What is just and equitable is judged by the reasonable expectations of the stakeholders in the context and in regard to the relationships at play. See BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, at paras. 58-59 (“BCE”).
[141] In assessing a claim of oppression, a court must answer two questions: (1) Does the evidence support the reasonable expectation asserted by the claimant? and (2) Does the evidence establish that the reasonable expectation was violated by conduct falling within the terms “oppression”, “unfair prejudice” or “unfair disregard” of a relevant interest? See BCE at paras. 68, 95.
[142] With respect to the first question, the claimant must identify the expectations that they claim have been violated by the conduct at issue and establish that the expectations were reasonably held. While it may be readily inferred that a stakeholder has a reasonable expectation of fair treatment, oppression generally turns on particular expectations arising in particular situations. The question becomes whether the claimant stakeholder reasonably held the particular expectation. Evidence of an expectation may take many forms depending on the facts of the case. See BCE at para. 70.
[143] Factors that are useful in determining whether a reasonable expectation exists include: general commercial practice; the nature of the corporation; the relationship between the parties; past practice; steps the claimant could have taken to protect itself; representations and agreements; and the fair resolution of conflicting interests between corporate stakeholders. See BCE at para. 72. The Supreme Court of Canada stated the following with respect to some of these factors:
a. Commercial practice. Commercial practice plays a significant role in forming the reasonable expectations of the parties. A departure from normal business practices that has the effect of undermining or frustrating the complainant’s exercise of their legal rights will generally (although not inevitably) give rise to a remedy. See BCE at para. 73.
b. The nature of the corporation. The size, nature and structure of the corporation are relevant factors in assessing reasonable expectations. Courts may accord more latitude to the directors of a small, closely held corporation to deviate from strict formalities than to the directors of a larger public company. See BCE at para. 74.
c. Relationships. Reasonable expectations may emerge from the personal relationships between the claimant and other corporate actors. Relationships between shareholders based on ties of family or friendship may be governed by different standards than relationships between arm’s length shareholders in a widely held corporation. When dealing with a close corporation, the court may consider the relationship between the shareholders and not simply legal rights as such. See BCE at para. 75.
d. Past practice. Past practice may create reasonable expectations, especially among shareholders of a closely held corporation on matters relating to participation of shareholders in the corporation’s profits and governance. Practices and expectations can change over time. Where valid commercial reasons exist for the change and the change does not undermine the complainant’s rights, there can be no reasonable expectation that directors will resist a departure from past practice. See BCE at paras. 76-77.
e. Preventive steps. In determining whether a stakeholder expectation is reasonable, the court may consider whether the claimant could have taken steps to protect itself against the prejudice it claims to have suffered. See BCE at para. 78.
[144] To complete a claim for oppression, the claimant must show that the failure to meet their reasonable expectation involved unfair conduct and prejudicial consequences within section 248 of the Act. Not every failure to meet a reasonable expectation will give rise to the equitable considerations that ground actions for oppression. The court must be satisfied that the conduct falls within the concepts of “oppression”, “unfair prejudice” or “unfair disregard” of the claimant’s interest, within the meaning of section 248 of the Act. See BCE at para. 89.
[145] In BCE, the Supreme Court of Canada stated the following with respect to these three concepts (at paras. 91-94):
[91] The concepts of oppression, unfair prejudice and unfairly disregarding relevant interests are adjectival. They indicate the type of wrong or conduct that the oppression remedy of s. 241 of the CBCA [Canadian Business Corporations Act, R.S.C. 1985, c. C-44] is aimed at. However, they do not represent watertight compartments, and often overlap and intermingle.
[92] The original wrong recognized in the cases was described simply as oppression, and was generally associated with conduct that has variously been described as “burdensome, harsh and wrongful”, “a visible departure from standards of fair dealing”, and an “abuse of power” going to the probity of how the corporation’s affairs are being conducted: see Koehnen, at p. 81. It is this wrong that gave the remedy its name, which now is generally used to cover all s. 241 claims. However, the term also operates to connote a particular type of injury within the modern rubric of oppression generally — a wrong of the most serious sort.
[93] The CBCA has added “unfair prejudice” and “unfair disregard” of interests to the original common law concept, making it clear that wrongs falling short of the harsh and abusive conduct connoted by “oppression” may fall within s. 241. “Unfair prejudice” is generally seen as involving conduct less offensive than “oppression”. Examples include squeezing out a minority shareholder, failing to disclose related party transactions, changing corporate structure to drastically alter debt ratios, adopting a “poison pill” to prevent a takeover bid, paying dividends without a formal declaration, preferring some shareholders with management fees and paying directors’ fees higher than the industry norm: see Koehnen, at pp. 82-83.
[94] “Unfair disregard” is viewed as the least serious of the three injuries, or wrongs, mentioned in s. 241. Examples include favouring a director by failing to properly prosecute claims, improperly reducing a shareholder’s dividend, or failing to deliver property belonging to the claimant: see Koehnen, at pp. 83-84.
3. Application to this case
[146] In my view, Mr. Eksir has failed to prove the expectations that he has put forward.
[147] Based on the evidence, Mr. Eksir did not have a reasonable expectation to receive audited financial statements for United Investment. From 2015 to 2020, an audit was conducted only for one year, i.e., for the year ending March 31, 2017. There is no evidence that Mr. Eksir requested audited financial statements prior to the breakdown of his relationship with Mr. Yousufzay. I accept Mr. Yousufzay’s evidence that Mr. Eksir and his wife instructed and supervised the preparation of United Investment’s financial statements by Mr. Eksir’s accountant, Tony Baksh. Mr. Eksir could have requested audited financial statements if he wanted such financial statements.
[148] Even if Mr. Eksir had established a reasonable expectation to receive audited financial statements, he did not establish that such reasonable expectation was violated. Mr. Yousufzay agreed to have an accountant prepare audited financial statements. On October 26, 2021, counsel for Mr. Yousufzay advised counsel for Mr. Eksir that Mr. Yousufzay was agreeable to using the accountant proposed by Mr. Eksir to do the audit, and that Mr. Yousufzay would cooperate fully. Ultimately, the accountant proposed by Mr. Eksir declined the audit engagement and Mr. Eksir decided to retain a forensic accountant for the purpose of the litigation. Mr. Fowlie only analyzed a limited number of transactions and did not perform a forensic audit.
[149] Similarly, Mr. Eksir did not establish that he had a reasonable expectation that United Investment’s by-laws would be complied with. There is no evidence that the parties ever referred to the by-laws. United Investment was managed informally. Annual meetings were not held and the procedures and formalities set out in the by-laws were not followed. There may be such an expectation going forward given the change in the parties’ relationship, but I find that there was no such reasonable expectation prior to 2021.
[150] I also find that Mr. Eksir did not prove a reasonable expectation that United Investment would be wound up if there was a breakdown in the relationship between the two shareholders. In my view, the directors’ resolution dated January 15, 2015 and the 2021 Letter of Intent do not support such an expectation. The reference to a wind-up in the directors’ resolution is in the context of the rights attached to common shares, which include the right to “share equally in the remaining assets of the Corporation in the event of a wind-up or dissolution of the corporation”. The resolution does not reflect any expectation as to when a wind-up could occur. As for the 2021 Letter of Intent, it does not support the alleged expectation as: (a) it does not contemplate a formal wind-up process; (b) it was not implemented; and (c) in any event, the process that it sets out is based on consent and is not related to a breakdown of the relationship between the two shareholders.
[151] While I am prepared to accept that Mr. Eksir had a reasonable expectation that Mr. Yousufzay would manage the affairs of United Investment with honesty and in good faith, I find that Mr. Eksir has not demonstrated that such an expectation was violated. In particular, I conclude that Mr. Eksir has failed to demonstrate that the Impugned Transactions violated his reasonable expectations:
a. $100,000 loan to Mr. Walid. Based on the evidence of Mr. Walid and Mr. Yousufzay, I find that Mr. Eksir knew about United Investment’s loan to Mr. Walid. The loan was not concealed and it was recorded as such. The note on the $100,000 cheque indicates that it is a loan. I also find that the loan was repaid by the payment made by Mr. Yousufzay on December 31, 2019. If Mr. Yousufzay’s intent had been to repay his own shareholder loan, he would not have paid more than what he owed, especially since he used his personal line of credit to make the payment. Finally, I find that Mr. Eksir has not established a reasonable expectation that the loan to Mr. Walid – who was a key employee of Nipash and his business partner’s brother – should have been with interest. Among other things, there is no evidence before me that the loans made to Nipash, Mr. Yousufzay and others bore interest. The record strongly suggests that numerous loans without interest were made over the years and Mr. Eksir has only complained about two of them.
b. $24,000 loan to Mr. Yousufzay. I find that Mr. Eksir knew about the loan to Mr. Yousufzay. The loan was not concealed and it was recorded as such. The notes on the $16,000 and $8,000 cheques indicate that they are loans. Further, I find that Mr. Eksir has not established a reasonable expectation that the loan to Mr. Yousufzay should have been with interest. Among other things, the evidence shows that Mr. Yousufzay did not pay interest on other shareholder loans that were in excess of $24,000, and Mr. Eksir has not taken issue with these loans.
c. Donations. I find that Mr. Eksir knew about the donations. I reject his bald allegation that his signature was forged on the cheques to Noon Academy. Among other things: (i) one of the cheques to Noon Academy is a Nipash cheque, not a United Investment cheque; (ii) Mr. Eksir’s signatures on the cheques look like his signatures on other cheques; (iii) Mr. Eksir has not provided any explanation as to why he thinks that the signatures on the cheques are not his, nor has he provided any evidence in support of his allegation of forgery; (iv) the explanation that Mr. Eksir was allegedly out of the country was given for the first time at trial, is unsupported and cannot apply to both cheques to Noon Academy as they were written in different years; and (v) given the small amounts involved and the fact that Mr. Yousufzay signed all the other cheques in issue, it would not have made sense for Mr. Yousufzay to forge Mr. Eksir’s signature on only the two cheques to Noon Academy which were written more than four years apart.
d. Home renovation expenses. Again, I find that Mr. Eksir knew about Mr. Yousufzay’s home renovations, and he agreed to the payment of the invoices in issue by United Investment. The fact that it was known that the invoices related to personal expenditures of Mr. Yousufzay is reflected in the treatment of the home renovation invoices in United Investment’s general ledger. The invoices of four out of eight vendors were recorded as personal expenditures and added to the amount of Mr. Yousufzay’s shareholder loan. The invoices of one vendor were curiously apportioned between Mr. Yousufzay’s shareholder loan ($9,602) and a business expenditure ($2,500). It appears that the accounting treatment of the invoices was based on an analysis of the invoices to determine which ones could appear to be a business expenditure of United Investment. I find that Mr. Yousufzay was not involved in decisions regarding the accounting treatment to be given to expenses of United Investment. Mr. Baksh and Ms. Nasouti were involved in such decisions, and I find that they would have alerted Mr. Eksir about the home renovation expenses had Mr. Eksir not already been aware of them. Thus, given that Mr. Eksir was aware of and agreed to the home renovation expenses, there can be no violation of a reasonable expectation.
e. Snow clearing expenses. As set out in his affidavit, Mr. Eksir’s criticism about the cheques that Mr. Yousufzay wrote to himself as a reimbursement for clearing snow at the Property is that the work was in fact done by employees of Nipash. Mr. Eksir’s belief in this regard is not supported by any admissible evidence. The statements of Nipash employees that he refers to in his affidavit are hearsay and inadmissible. In contrast, Mr. Yousufzay has adduced direct evidence of witnesses who saw him do the snow clearing work. Since Mr. Eksir’s only criticism has not been established, he has not demonstrated any violation of a reasonable expectation.
[152] In light of the foregoing. I conclude that Mr. Eksir has not shown that he is entitled to relief under section 248 of the OBCA as he has failed to prove that any reasonable expectations that he held were violated by the conduct of Mr. Yousufzay.
[153] Given my conclusion on this point, I do not need to discuss Mr. Yousufzay’s arguments regarding derivative actions and abuse of process.
4. Wind-up
[154] Subsection 207(1)(b)(iv) of the OBCA provides that a corporation may be wound up by order of the court where the court is satisfied that it is just and equitable for some reason, other than the bankruptcy or insolvency of the corporation, that it should be wound up. Under subsection 207(2), the court may make such order under section 207 or section 248 of the OBCA as it thinks fit. Thus, while the wide range of discretionary remedies under the oppression provisions of section 248 are available under section 207, it is not necessary that there be oppression for an order to be made under section 207. Nor is it necessary if section 207 is engaged that the remedy be winding-up. See Muscillo v. Bulk Transfer Systems Inc., at para. 22 (Ont. S.C.J.) (“Muscillo”).
[155] If the relationship of trust and confidence between partners in corporate guise has broken down and the continuation of the business between them operating as equal partners is not possible, such a situation is enough to trigger the court’s powers under section 207: see Muscillo at para. 23 and Wittling v. Bergman. However, the Court will usually only exercise its discretion to order a “just and equitable” winding-up if the disharmony has resulted in a sufficiently serious failure of the reasonable expectations of the parties to warrant such equitable relief: see Falus v. Martap Developments 87 Limited, 2012 ONSC 2301, at paras. 45-47; Animal House Investments Inc. v. Lisgar Development Ltd., at paras. 56-61 (Ont. S.C.J.); and Libfeld v. Libfeld, 2021 ONSC 4670, at paras. 447, 451.
[156] In my view, a wind-up is not an appropriate remedy in this case. As set out above, there has not been a failure of the reasonable expectations of the parties in this case, let alone one that is sufficiently serious to justify such an extreme outcome. Even if one were to accept Mr. Eksir’s submissions regarding the Impugned Transactions, the impact on United Investment (e.g., loss of interest, improperly charged expenses, etc.) would not be so significant as to justify a wind-up. Other less drastic remedies would be more appropriate, such as ordering Mr. Yousufzay to make a payment to United Investment. As Mr. Eksir opposes an order forcing him to sell his shares to Mr. Yousufzay and only wants a wind-up order, I will not explore other possible relief under section 207 of the OBCA.
[157] Given my findings regarding Mr. Eksir’s allegations, there is no factual basis for the alleged disharmony and the alleged loss of trust and confidence with respect to United Investment (I make no findings with respect to Nipash). I also note that Mr. Yousufzay and Mr. Eksir are not equal partners, and that Mr. Eksir’s expectations have to be consistent with the fact that he is a minority shareholder of United Investment.
5. Section 106 of the OBCA
[158] Section 106 of the OBCA states as follows:
Requisition by court
106 (1) If for any reason it is impracticable to call a meeting of shareholders of a corporation in the manner in which meetings of those shareholders may be called or to conduct the meeting in the manner prescribed by the by-laws, the articles and this Act, or if for any other reason the court thinks fit, the court, upon the application of a director or a shareholder entitled to vote at the meeting, may order a meeting to be called, held and conducted in such manner as the court directs and upon such terms as to security for the costs of holding the meeting or otherwise as the court deems fit.
Power of court
(2) Without restricting the generality of subsection (1), the court may order that the quorum required by the by-laws, the articles or this Act be varied or dispensed with at a meeting called, held and conducted under this section.
Effect of meeting
(3) A meeting called, held and conducted under this section is for all purposes a meeting of shareholders of the corporation duly called, held and conducted.
[159] This provision has been used to order that a meeting of shareholders take place under varied quorum requirements to prevent the non-attendance of minority shareholders from frustrating the ability of the meeting to transact business. The cases in which section 106 has been used usually involve private corporations in which a minority shareholder prevents the legitimate exercise of majority shareholder rights. See Ebrahim v. Continental Precious Minerals Inc., 2012 ONSC 2918, at para. 76.
[160] In this case, by refusing to attend a shareholder meeting, Mr. Eksir is frustrating the ability of the meeting to transact business and preventing the legitimate exercise of the right of the majority shareholder to appoint directors. In my view, the proposed appointment of a third director at the shareholder meeting is not oppressive. It is in accordance with the articles of incorporation, which require a minimum of three directors, and with the legitimate exercise of majority shareholder rights. Given that there is no intention to remove Mr. Eksir from the board of directors, Mr. Eksir will be able to participate in the decisions of the board of directors and have his voice heard.
[161] Accordingly, I find that this is an appropriate case for this Court to call a meeting of shareholders of United Investment under section 106 of the OBCA and to order that the quorum required by the by-laws be dispensed with.
D. CONCLUSION
[162] Mr. Eksir’s Application is dismissed and Mr. Yousufzay’s Application is granted.
[163] If costs cannot be agreed upon, Mr. Yousufzay shall deliver submissions of not more than three pages (double-spaced), excluding the bill of costs, by July 7, 2023. Mr. Eksir shall deliver its responding submissions (with the same page limit) by July 21, 2023. The submissions of all parties shall also be sent to my assistant by e-mail and uploaded onto CaseLines.
Vermette J. Released: June 23, 2023
[1] Section 7.6 of General By-Law No. 1 provides that “[a] quorum of any Meeting of Shareholders shall be persons present or represented by proxy, not being less than two (2) in number and holding or representing not less than fifty-one percent (51%) of the total number of the issued shares of the Corporation for the time being enjoying voting rights at such meeting. […] ”
[2] While Mr. Eksir argues that paragraph 21 should be struck as it is irrelevant, I note that he relies on the 2021 Letter of Intent referred to in this paragraph in his closing submissions in support of his position on wind-up. This negates his argument based on irrelevance.
[3] Paragraph 8 of the Affidavit of Mr. Yousufzay sworn February 7, 2022 refers to statements made by Tony Baksh. These statements are inadmissible for the truth of their contents, as they are hearsay, but the evidence is admissible for the purpose of showing that Mr. Baksh made these statements to Mr. Yousufzay, whether they were true or not.