Court File and Parties

Court File No.: CV-24-00722958-0000 Date: 2025-09-23 Superior Court of Justice – Ontario

Re: Kimberley Jackson and Distinctly Patio Inc., Applicants And: Steven Jackson, Peter Jackson and 2131376 Ontario Ltd. operating as Think Patio, Respondents

Before: Akazaki J.

Counsel:

• Gregory Sidlofsky and Jake Palace, for the Applicants
• Payam Ezzatian, for the Respondent Steven Jackson and 2131376 Ontario Ltd.
• Alexander Verrilli, for the Respondent Peter Jackson

Heard: July 24, 2025

Reasons for Decision

Overview

[1] This dispute in the prolonged aftermath of an attempted corporate restructuring emerged from family conflict and misunderstandings over the transfer of nine of a company's eighty outstanding shares to the principals' son. For convenience, I will take the liberty of referring to the Jackson family members by their first names.

[2] During happier times, Kimberley and Steven Jackson operated two nearby patio furnishings businesses in Kitchener. Distinctly Patio Inc. (DPI), operated mainly by Kimberley, was a retail showroom offering designer furniture and equipment directly to the public. 2131376 Ontario Ltd., operated by Steven and later styled Think Patio, was a wholesale warehouse catering to big-box outlets and online stores. The businesses' only overlap beyond the family connection, was the occasional discount sale of 2131376's returned and shopworn goods in DPI's showroom.

[3] Until 2020, the couple had equal shares in both companies. Because DPI used to have a third business partner, the DPI shareholder agreement contained a non-competition and confidentiality clause surviving three years after a shareholder ceased to own any shares. 2131376's shareholder agreement had no such clause.

[4] In September 2020, the couple divested from each other's companies. Steven purchased all of Kimberley's shares in 2131376. Kimberley purchased thirty-one out of Steven's forty shares in DPI. Steven sold the remaining nine shares to their son Peter. The parties differ on the reason for the restructuring. Kimberley claims the marriage was already over, because of domestic abuse by Steven. Steven maintains they organized the share swap following financial planning advice, and that they did not separate until May 2021. Kimberley appears partly to have corroborated his position and contradicted hers, by deposing in the divorce proceeding that they did not separate until March 2022.

[5] DPI claims the nine shares held by Peter. Kimberly believes Peter obtained the consideration for his share purchase through an unauthorized bonus paid by DPI to Peter, then to Steven. DPI also claims an accounting for profits that 2131376 has earned in violation of Steven's non-competition obligations under the DPI shareholder's agreement. Steven and Peter rely on the two-year limitation period for starting proceedings. Peter has also countersued for an oppression remedy requiring Kimberley or DPI to disclose DPI financial data, with a view to force a purchase or a redemption of his shares.

[6] There was not much disputed territory in the conflict, at least with respect to the basic transactional elements. The family dynamic has escalated the mutual pressure and caused their legal teams to frame the issues to gain inches of advantage. The issues are whether:

1. Peter became a shareholder, despite not having signed the shareholder's agreement;

2. the application is prescribed by the two-year limitation period under the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B;

3. DPI is the beneficiary of a constructive trust for the nine shares, because the funds paid to Steven for the shares were derived from DPI;

4. the court must direct an accounting reference, because Steven has breached the non-competition provision of the DPI shareholder agreement; and

5. Peter is entitled to oppression remedies.

[7] The applicants' claims based on the alleged impropriety of the share transfer and Peter's bonus must be dismissed. Getting to that conclusion within the above issue framework takes the analysis through logical twists and turns, but the result remains the same.

[8] Peter's failure to sign the shareholder's agreement did not nullify Steven's transfer of the shares to him. That omission did estop his entitlement to financial disclosure and limited the extent to which DPI could be guilty of oppression of a minority shareholder. Peter's impaired shareholder rights also required the court to interpret the restrictive covenant in the shareholders' agreement more strictly against DPI than in the case of the claim for damages against Steven. This meant the covenant could not have yet prohibited Peter's employment as the manager of 2131376's retail outlet, because he has not signed the agreement.

[9] Kimberley had access to the information about the bonus by March 2022 at the latest. This meant her claim based on the bonus was statute-barred. DPI's claim against Steven for breach of the restrictive covenant was not statute-barred, because the provision restricted his ability to engage in competition with DPI for three years after the September 2020 restructuring.

[10] Although the constructive trust claim is statute-barred, the applicants have also not demonstrated that they are entitled to a constructive trust. Peter paid more for the shares out of his own pocket than the $10,000 Kimberley understood to have been Steven's price. Therefore, the fact that Peter received a bonus from DPI to enable him to pay Steven's actual price of $65,250 did not deceive Kimberley into signing off on the share transfer. If there was a deception, the claim would be for misappropriation damages. The insufficiency of evidence of a marked departure from the way the Jacksons handled the corporate finances made this claim inconclusive. The applicants have failed to prove their trust claim on a balance of probabilities.

[11] The extent to which Steven and 2131376 breached the restrictive covenant can only be determined in an accounting reference based on the price range of similar shares sold by DPI. The court will order disclosure of 2131376's records for the relevant period, to allow DPI a reasonable time to determine whether to prosecute the reference.

[12] Finally, the court must consider the equities of Peter having paid Steven for the nine shares out of his own money and money from DPI, and Peter's lack of full rights as a shareholder. The fairest outcome would be to require DPI to redeem the shares for the price he paid, excluding the value of the bonus. This equitable result should land DPI and Kimberley almost on the same spot as if the claim against the shares had been allowed, because Kimberley would have had to pay a comparable amount to Steven for the shares. This conclusion also ensures the family saga over the shares can end, while mostly fulfilling the parties' original expectations.

[13] I will now turn to a more detailed analysis of the five points.

1. Effect of Peter's Failure to Sign Shareholders' Agreement

[14] Kimberley did not deny that she knew about her husband's transfer of nine shares in DPI to Peter. As president of DPI, she signed the share certificates issuing them to Peter and cancelling Steven's. She also signed the director's resolution consenting to the transfer. Her grievance is that she was unaware that the transfer was a device for Steven to extract the after-tax value of a $70,000 bonus paid to Peter. I will deal with this point in the constructive trust issue. She relies on the parties' omission of Peter's signature on the shareholders' agreement as a fortuitous ground for nullifying the transfer.

[15] Peter did not dispute that he did not sign the shareholders' agreement. His position was that it would be unfair to deny him the value of the shares because of a technicality in the shareholders' agreement:

My purchase of shares in DPI was not a plot or conspiracy. My purchase of shares was coordinated by Kimberley and Steven. I followed their instructions and guidance. Kimberley and Steven never mentioned to me that I needed to sign a shareholders' agreement.

[16] Peter's failure to sign the shareholders' agreement required the court to consider s. 4.5 of that agreement:

4.5 Further Restriction of Transfer. No Shareholder shall Transfer all or any part of its Interest to any person, whether a Shareholder or not, who is not a party to or has not agreed to be bound by this Agreement until such person subscribes to or agrees to be bound by this Agreement. The Shareholders and the Corporation will not recognize or treat as a shareholder of the Corporation any person who acquires any interest or control over any Shares or afford any such person the rights afforded by this Agreement or any of the incidents connected with being a shareholder of the Corporation until such person subscribes to or agrees to be bound by this Agreement, and the Shareholders need only deal with as a shareholder of the Corporation persons who have subscribed to or agreed to be bound by this Agreement.

[17] The meaning of s. 4.5 is somewhat elusive, but not unattainable. It consists of two parts. The first part prohibits an existing shareholder from transferring an interest to any person, "whether a Shareholder or not," if that person has not signed or agreed to the agreement. This implies that one can be a shareholder, without having agreed to the agreement. The second part stipulates the transferee's agreement to be bound by the shareholders' agreement is a precondition to recognition of any person "who acquires any interest or control over any Shares" as a shareholder and to the benefit of any rights as a shareholder.

[18] Peter's counsel cited s. 108(8) of the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 ("OBCA"), to argue that it deemed him to be a party:

(8) If a unanimous shareholder agreement is in effect when a person who was not otherwise a party to the agreement acquires a share of the corporation, other than under subsection (1),

(a) the person who acquired the share shall be deemed to be a party to the agreement whether or not that person had actual knowledge of it when he or she acquired the share; and

(b) neither the acquisition of the share nor the registration of that person as a shareholder operates to terminate the agreement.

[19] The effect of s. 108(8) is simply that a shareholder becomes party to the unanimous shareholders' agreement, including the restrictions in s. 4.5. There is no paradox, because the phrase, "until such person subscribes to or agrees to be bound by this Agreement," requires a positive act even for a deemed party to the agreement.

[20] In Peter's situation, his acquisition of the shares made him party to an agreement refusing to recognize the legal entitlements flowing from the shares until he signed the document. Nothing in s. 4.5 expressly states that the share transfer is null and void. In Consolidated-Bathurst v. Mutual Boiler, [1980] 1 S.C.R. 888, the Supreme Court of Canada refused to construe a contractual exclusion in a manner nullifying the benefit to a party in the absence of clear wording indicating this was the parties' intention. The inconsistencies in the wording, both recognizing transfers to non-signatories and prohibiting them, create sufficient ambiguity to preclude any clear intent to nullify altogether the transfer from Steven to Peter.

[21] This logic applies with even greater force here, because of Peter's lack of business experience and reliance on his parents' representations about the adequacy of the share transfer formalities. I agree with Peter's position that his parents' written assent to the transfer estops either of them from denying the validity of the transfer.

[22] I therefore find that s. 4.5 of the shareholders' agreement did not nullify the transfer of the shares to Peter. However, his failure to agree to the terms and conditions of the shareholders' agreement did limit his rights as a shareholder. This, we will see, impacts his counterapplication.

2. Limitations Issue

[23] The applicants started their proceeding on June 25, 2024, over three years after the corporate restructuring and transfer of nine shares to Peter. The respondents submit the claim is barred by the expiry of the two-year limitation period in s. 4 of the Limitations Act, 2002, starting on the date of discovery of the claim. Under s. 5(1), a claim is discovered on the earlier of:

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).

[24] By the respondents' admission, 2131376's consumer sales after rebranding under the Think Patio trading style did not begin until July 2022. Moreover, the three-year period barring competition with DPI did not end until September 2023. The claim for an accounting of profits based on the non-competition clause in the shareholders agreement cannot be prescribed.

[25] Subsection 5(2) requires the court to presume the applicants knew of the constituent elements of the claim when the act or omission occurred, "unless the contrary is proved." The onus is on the applicants to prove Kimberley's inability to discover the claim with reasonable diligence, before June 25, 2022.

[26] DPI's claim for a constructive trust on the shares Steven sold to Peter is based on Kimberley's discovery of the $70,000 bonus DPI paid to Peter in March 2024, after she retained BDO to prepare a valuation of the company for her divorce proceedings. The respondents argue she ought to have known the constituent elements of her claim around the time of the transaction. The bonus payment was not an accounting opinion. Rather, it was source information. DPI was the source. The realities of a closely held corporation are such that the individuals behind them can be treated as the controlling minds. In DPI's instance, Kimberley's state of knowledge, or a reasonable person with her abilities and in her circumstances, determine the discovery of the claim.

[27] The applicants argued that the abusive family dynamic, including Steven's exercise of coercive control over Kimberley until their separation, impaired her ability to detect the misappropriation. Since the perpetrators hid the transaction in plain sight, she submitted that the limitation period did not begin until she reviewed the BDO report. The defect in this argument is that the timing of the BDO report was only loosely connected with the discoverability issue, in that Kimberley would not have commissioned it but for the divorce application. The timing was dictated by the requirements of the Family Law Rules, O. Reg. 114/99. This court has held that reliance on a "eureka" moment injects too much uncertainty in the knowledge-discovery process: Barry v. Pye, 2014 ONSC 1937, at paras. 44-46. The proof of circumstances starting the limitation period must explain the delay beyond an independent event flipping the switch between not knowing and knowing.

[28] Here, if I were to accept the applicants' explanation for starting the limitation period based on Steven's controlling behaviour during the marriage, the disputed date of separation undermines the applicants' position. Kimberley disputed Steven's date of separation of May 3, 2021, and asserted March 7, 2022, as the date. In this civil proceeding, she deposed the marriage irreparably broke down in 2020. If one accepted March 7, 2022, as the date from which Kimberley escaped Steven's coercion, a reasonable person with Kimberley's abilities as a businessperson in such circumstances would have had both intellectual ability and access to the corporate and banking records of DPI to look for any financial irregularities perpetrated by Steven.

[29] I conclude that the applicants' claims arising from the bonus paid to Peter and the sale of nine shares, both 2020 events, could have been discovered starting in March 2022 at the latest. The applicants would have had until March 2024 to discover the alleged impropriety and to start a proceeding. However, they waited three months beyond that month to start the proceeding. The claims for the constructive trust and for the misappropriation are therefore dismissed. Despite the determination that they are statute-barred, I shall consider these claims on their merits.

3. DPI's Claims for Constructive Trust and Reimbursement

[30] DPI asked the court to impose a constructive trust for the nine shares, because the funds paid to Steven for the shares were unlawfully derived from DPI. At the core of this argument is Kimberley's contention that Steven had effective financial control over the two businesses. She provided evidence that her husband abused her, belittled her business skills, and kept her in the dark on any money issues. At the time of the restructuring, she understood her husband was planning to sell Peter the nine shares for $10,000.

[31] A constructive trust operates with the same force as an express trust. The difference is that one arises from circumstance, whereas the other is created by deed or another formal instrument. Ultimately, the facts must establish a compelling equitable justification for deeming someone's property the property of another, in the absence of express settlement of a trust. In Moore v. Sweet, 2018 SCC 52, [2018] 3 S.C.R. 303, at para. 33, the Supreme Court cautioned:

[A] proper equitable basis must exist before the courts will impress certain property with a remedial constructive trust. The cause of action in unjust enrichment may provide one such basis, so long as the plaintiff can also establish that a monetary award is insufficient and that there is a link between his or her contributions and the disputed property. … Absent this, a plaintiff seeking the imposition of a remedial constructive trust must point to some other basis on which this remedy can be imposed, like breach of fiduciary duty.

[32] Kimberley signed the corporate acts registering the share transfer from Steven to Peter and issuing the share certificate. This fact leaves the court scant justification to impose a constructive trust on the shares, because she assented to the transfer to Peter.

[33] In March 2024, Kimberley hired BDO Canada to prepare a business valuation of DPI for equalizing the couple's net family property in the divorce proceedings. She learned from their investigation that Steven had issued a payment from DPI to Peter in August 2020, and that Peter used these funds to pay for the share transfer.

[34] Peter deposed that he did receive a $70,000 bonus from DPI prior to the share transfer. After statutory withholding of taxes, he received a net payment of $48,082.58. According to the promissory note from Peter to Steven of September 30, 2020, the price for the nine shares was $65,250. Bank transfer receipts in March 2021 show that Peter paid 2131376 $60,000. The difference of $17,167.42 between the price and the net bonus was approximately the amount he had saved after leaving school and working at DPI. The transactions were consistent with the evidence of Steven and Peter that the share transfer was the first step toward Peter eventually taking over DPI.

[35] The respondents also pointed to Kimberley being privy to emails and a "steps memo" prepared by the family's financial advisor suggesting that both Kimberley and Peter could receive bonuses from DPI to finance the share purchase from Steven. At least the idea of issuing Peter a bonus to help fund his purchase was on the table prior to the transaction, including the fact that both Kimberley and Peter lacked sufficient personal funds to purchase Steven's shares.

[36] Kimberley knew about her husband's sale of nine shares to her son. The discovery giving rise to her decision to take legal action was the amount of the consideration. Because it was several times more than what her husband led her to believe it was going to be, she thought it was an indirect money grab by her husband. In fact, she characterized it as misappropriation and traceable into Peter's payment to Steven for the shares.

[37] To support the contention that the bonus paid to Peter was irregular, the applicants adduced evidence attacking the credibility of Peter's evidence that the shares were intended to be the first step in taking over DPI. Evidence from DPI employees painted him as an uncommitted employee who abused his family status and mistreated his mother. This evidence, the applicants argued, supported two propositions: first, that Steven and Peter abused Kimberley, and second, that Peter did not deserve a bonus.

[38] The evidence of hostilities in the family, aligned two against one, appeared to be corroborated by the independent evidence of Peter's conduct as an employee of DPI. The applicants pointed to the fact that the police charged Steven with domestic assault, which charges were only dropped because of delay in prosecution. Charges are only pleadings in a criminal proceeding: they are not evidence that any offence occurred, and the withdrawal of charges do not refute the allegations. The contents of the Crown brief, if available, were not in evidence. The applicants also filed affidavits from DPI's employees affirming that Peter was hostile to both his parents, although he was allegedly more verbally abusive toward his mother.

[39] The applicants pointed to the fact that Steven signed all bonus cheques paid by DPI to family members in August and September 2020, and that bonus cheques to other employees were signed by Kimberley. Moreover, the bonuses to the other employees were for more modest amounts, ranging from $375 to $15,000. Among those paid to family members, two of the cheques were to Steven and Kimberley, in the amount of $141,000 each. A further bonus cheque in the amount of $31,294 was made out to their daughter Stephanie, who was not even an employee of DPI. It was suggested that this was a way of gaining an income-splitting tax advantage for Stephanie's tuition expenses.

[40] The four cheques to the family all appeared to have been negotiated at TD Canada Trust by the same teller on September 26, 2020. Because none of them were manually endorsed, the court could not determine who among the Jackson family were in attendance.

[41] The applicants also maintained that the documents such as the "steps memo" circulated around the time of the restructuring did not prove Kimberley's agreement to a bonus to Peter.

[42] The applicant's case for attacking Steven's transfer of DPI shares to Peter depended on the court connecting a constellation of inflection points:

a. Steven keeping Kimberley in the dark about DPI's financial matters and his misrepresentation of the consideration for the share transfer to set up the tolling of the two-year limitation period

b. Peter's lack of entitlement to a bonus

c. Ulterior motive on Steven's part to transfer the shares to Peter, as opposed to a symmetrical share swap between Steven and Kimberley of the shares in the two companies

[43] DPI's claim arises from Steven's issuance of Peter's bonus to help pay for the shares. There is no compelling legal reason, beyond fairness between the spouses, for the court to derogate from Steven's property right to sell the shares to his son and Peter's right to acquire them from his father, after Kimberley signed the corporate documents finalizing the transfer. The only legal obstacle was s. 4.5 of the shareholders' agreement. Even if that were a reason for setting aside the transfer, the annulment of the transfer would result in the shares being returned to Steven. Peter would then have a claim against his father for what he paid for the shares.

[44] Had Steven gifted the shares or sold them to Peter for token consideration, DPI could not claim an interest in the shares. After the shares had been issued to Steven some years prior to 2020, they were essentially choses in action like any other personalty in Steven's hands. If the issuance of the bonus was a device for Peter' overpayment to Steven for the shares by an amount greater than Kimberley's understanding or expectation of their value, imposing a trust on the shares provides DPI no compensation and deprives Peter of what he paid for out of his own pocket. Any equitable remedy corresponding to DPI's deprivation does not trace back to the shares. Rather, they are traceable into the extra funds received by Steven. The equities therefore fail to align into a viable proprietary claim by DPI for a beneficial interest in the shares.

[45] What remains, in the claim stemming from the share transfer, is the claim against Steven for orchestrating an unearned bonus to Peter. Whether cast as a breach of trust or misappropriation using Peter as a proxy, the court must examine the corporate evidence.

[46] The applicants argued civil conspiracy, but Peter could not participate in the act of drawing the cheque. Paying and receiving are only a series of events. A series of events is insufficient to found conspiracy: Derenzis v. Johnson, 2022 ONCA 323, at para. 14. Receiving the money only to hand it back to the individual drawing the company cheque could amount to participation in the wrongful act beyond simply receipt. A necessary element of civil conspiracy is a concerted action leading to the damage suffered by the claimant: Can-Dive Services Ltd. v. Pacific Coast Energy Corp., 96 B.C.L.R. (2d) 156 (CA), at para. 5. Evidence on this point was tenuous but not absent.

[47] The equities of the situation and the result required by good conscience could also depend on the status of the marriage. On that point, all the circumstantial evidence, including consultation with legal and accounting advisors, pointed to restructuring based on the couple's corporate and financial needs. The only circumstance linking the restructuring to the marital separation was the loose proximity and order in which those events occurred.

[48] Steven did not file his divorce application in his application record, but his affidavit stated a date of separation in May 2021. In her Answer to the divorce application, Kimberely cited March 7, 2022, as the date of separation. In her affidavit in the divorce application, she stated:

I make this Affidavit in response to the Applicant's Notice of Motion and Affidavit, dated July 22, 2024, requesting a Final Order declaring that our date of separation is May 3, 2021. I do not agree with the Applicant's motion, and assert that our date of separation is March 7, 2022.

[49] Later in the same family law affidavit, Kimberley stated:

… I did stay with my parents or at a hotel for a day or two whenever Steve would act very abusive towards me and/or physically assault me starting in the summer of 2020 and right up until I left the marriage in March of 2022.

[50] There is no real inconsistency in Kimberley's version of the marital breakdown. She could have stayed in an abusive marriage because of the coercive nature of the experience. Regardless of the family law significance of the disagreement over the date of separation, the state of the Jackson marriage in September 2020 could have impacted Kimberley's ability to inquire into the consideration Peter paid to Steven for the shares and the source of the money. However, such coercion could not have affected Steven's right to transfer his shares to Peter for whatever price he set.

[51] Kimberley's evidence on the application did not assert a psychological impediment to objecting to the transfer or a feeling that she was compelled to sign the director's resolution and share certificate. Her retrospective objection, at its most forceful, was that the increase in the sale price was part of Steven's plan to extract value from DPI before divesting from it:

34. Steven had initially advised me that the Disputed Shares would be sold to Peter for $10,000. However, after I contacted Howard Barnes, whom Steven had retained to structure the purchase of his shares, Steven increased the price of Peter's shares sixfold and requested $65,250 for the Disputed Shares.

35. I now believe that the increase in the price was a result of my discussion with Mr. Barnes [the corporate advisor hired by Steven] about our marital problems and my concern about how those problems could raise potential issues with the restructuring. Now that I know how Steven had Peter pay for the shares it is clear that it was to punish me.

36. Steven specifically led me to believe that he and Peter had devised some arrangement whereby Peter would receive the funds required to purchase the DPI shares from Steven's company. But as set out in detail below, this was false.

[52] Essentially, her understanding had been that Steven was funding the share transfer to Peter. If that were correct, the consequence of the bonus cheque would be a misappropriation claim without impact on the title to the shares. Because the transfer to Peter would have occurred in her expected sequence of events, the circumstances appear insufficient for the equitable branding of a constructive trust in favour of DPI as beneficial owner.

[53] Misappropriation or theft is enrichment at the expense of another without authorization, including authorization vitiated by deception. To reach the conclusion that the bonus amounted to misappropriation, the court must find that the payment departed from the Jacksons' corporations' customary behaviour in the operation of their businesses. All proof of irregular conduct, like all matters of proof, requires clear, convincing, and cogent evidence: Law Society of Ontario v. Diamond, 2021 ONCA 255, 458 D.L.R. (4th) 603, at para. 60.

[54] The bonus cheque to Stephanie and the "steps memo" from the financial advisors was evidence of the Jacksons' practice of moving capital among the companies and family members and labelling them for income tax treatment. As previously mentioned, Kimberley knew that the issuance of bonuses to her and to Peter were necessary to complete the restructuring. The applicants did not sue Stephanie for the return of her bonus from DPI. The applicants' evidence from non-family DPI employees that Peter was an undeserving employee only proved that nepotism could spoil a workplace. There was insufficient evidence, including the evidence from the financial advisors, to determine whether the bonus paid to Peter was theft or some other duplicitous means of diverting funds from DPI to Steven.

[55] At this point, the quality of the evidence of wrongful conduct on Steven and Peter's part and the limitations issue of discoverability converge to undermine the theory that Peter's bonus was such an exceptional event that it presumptively amounted to misappropriation by Steven. Kimberley deposed that the restructuring was integral to her gaining control of DPI and giving up her interest in 2131376, upon the failure of the marriage. If the irregularity of the bonus paid to Peter was that he did not deserve it, it would have been apparent at least by the next tax return season. Steven mishandled the transaction and the bonus by failing to be more open with Kimberley. That appears to be as far as the evidence takes us.

[56] I conclude that the applicants have failed to establish the nine shares transferred to Peter were subject to a constructive trust in favour of DPI and that they have failed to prove the $70,000 bonus paid to Peter amounted to misappropriation.

4. DPI's Claim Based on Breach of Non-Competition Clause

[57] There was substantial agreement that 2131376 did sell patio furniture directly to retail consumers during the three-year non-competition interval from July 2022 to September 2023. 2131376 registered the trademark Think Patio in 2021 and, in July 2022, converted a warehouse near DPI into a patio equipment and furniture store. This, the applicants submitted, breached s. 13.1 of the DPI shareholders' agreement, which I have edited to eliminate unnecessary wording:

13.1 Covenants of Shareholders. So long as a Shareholder owns any Shares and for a period of three years after the Shareholder ceases to own any Shares, the Shareholder shall not … :

a) carry on or be engaged in … any business which:

(i) is similar to or competitive with any business which is being carried on by the Corporation or any of its Subsidiaries during the time the Shareholder owns any Shares or any business which is being carried on by the Corporation or any of its Subsidiaries at the date the Shareholder ceased to own any Shares; and

(ii) is within a 100 kilometer radius of any place where the Company or any of its Subsidiaries carries on business while the Shareholder owns any Shares or of any place where the Company or any of its Subsidiaries is carrying on business as at the date that the Shareholder ceased to own any Shares;

[58] There was no similar provision in the 2131376 shareholders' agreement. The above provision in the DPI shareholders' agreement was put in place to prevent the third shareholder, who was not a member of the Jackson family, from setting up a competing business after having gained access to DPI's customer base, pricing, and commercial methods. Steven and 2131376 argued that any trade directly to customers was minimal during the subject interval.

[59] Steven and 2131376 argued the non-competition provision was unenforceable, because it was unreasonable or ambiguous. They argued that enforcement on the basis that both companies sold patio furniture and were therefore "similar" would put Steven out of work. In the alternative, they argued that the wording did not adequately distinguish between DPI's business and that of 2131376. They had operated harmoniously within the family, for many years. These are straw-man arguments. DPI's claim focused narrowly on 2131376's entry into the retail trade. The assertion that the injunction against competition would put Steven out of work did not accord with his assertion that the retail revenues were minimal and did not turn a profit for 2131376.

[60] Non-competition clauses involving sale or purchase of a business are enforceable and attract less judicial scrutiny than in the employment context: Payette v. Guay Inc., 2013 SCC 45, [2013] 3 S.C.R. 95, at para. 58. They are essentially contractual forms of laws against unfair competition. If DPI were to sell patio furniture using the 2131376 trademark Think Patio, 2131376 could sue for an injunction and accounting for profits, even if the infringement did not represent a significant portion of the unfair competitor's business.

[61] Within the family dynamic of the case, 2131376 could have kept its side of the restructuring bargain better by refusing to accept retail custom business until the three-year period expired. The admission by Steven that 2131376 did engage in retail sales during the September to July interval means he could have breached the shareholders' agreement. The way to determine whether such breach occurred is to examine 2131376's sales and to compare them with DPI's inventory for the same period. The financial litigation risk that DPI runs by pursuing the accounting reference would be that it amounts to a trial of the issue in which it could lose if the referee finds no profits to disgorge.

[62] Peter's role in 2131376's operations as the manager of the new Think Patio store in Woodstock, a location within a 100 km radius of Kitchener, adds a further complication to this issue. As a DPI shareholder, his management of the Woodstock store violates s. 13.1 to this day. Because I have rejected DPI's constructive trust claim over his shares, the court must determine whether to hold Peter to the same contractual obligation as Steven as the alter ego of 2131376. Kimberley, as the principal of DPI, has effectively barred Peter from participation in DPI since she dismissed Peter from its employ. In the counterapplication, Peter sued for access to DPI's financial information based on his shareholder rights.

[63] Peter's acquisition of less than an eighth of DPI's issued shares and his role as a Think Patio employee tip the scales in favour of the more rigorous treatment of the non-competition clause. In his case, its operation resembles a restrictive covenant in an employment contract. He should at least be given the opportunity to choose between being bound by it and not being bound. It would be unfair to impose on Peter the non-competition terms of s. 13.1 until he agrees to sign the DPI shareholders' agreement. I therefore find that Peter has not yet violated a restrictive covenant he has yet to sign.

[64] Despite DPI's entitlement to an accounting reference, the most practical immediate disposition would be to order 2131376 to produce all records of retail sales from the beginning of July 2021 to the end of September 2022. DPI should then be afforded a period of 30 days to determine whether it is worth pursuing in a reference before an associate judge.

5. Peter's Counterapplication

[65] Peter's counterapplication seeks corporate oppression remedies under s. 248 of the OBCA. He seeks access to DPI's financial records and an order requiring DPI or his mother to redeem or purchase the shares without a minority discount.

[66] If, pursuant to s. 248(2), the court finds a corporation has oppressed a minority shareholder by unfairly prejudicing or disregarding the complainant's interests, s. 248(3) vests the court with broad remedial authority to "make any order it thinks fit to rectify the matters complained of." This includes setting aside a transaction or contract, amending unanimous shareholder agreements, and the company's articles and by-laws: Waxman v. Waxman (2004), 44 B.L.R. (3d) 165 (ON CA), at para. 523. Both the finding of oppression and the remedy are informed by the court's supervisory role over corporations and the fulfilment of stakeholders' reasonable expectations: BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, [2008] 3 S.C.R. 560, at para. 56.

[67] The stated grounds for finding oppression of Peter included his dismissal from employment at DPI, the refusal by Kimberley to provide access to DPI's financial records, and the applicants' lawsuit attacking Peter's beneficial title to the shares. Ordinarily, these deprivations of shareholder rights would constitute oppression. There are two twists to this plot, however.

[68] First, Peter has title to the shares but has none of the usual participatory shareholder rights. The company is entitled to ignore his rights under s. 4.5 of the shareholders' agreement.

[69] Second, perhaps more important, is the s. 13.1 bar against competition. If Peter signed on to the rights and obligations of a shareholder, as opposed to being deemed to be a party to the agreement, he would be in breach. The equities insulating him from being sued for damages related to his work at Think Patio prior to signing on to the DPI shareholders' agreement, that would not countenance the use of that shield while working against the interests of DPI.

[70] These preliminary considerations do not necessarily stand in the way of what he seeks. His position that he should be compensated for having to sell or return the shares is not unsound. The court has authority under s. 248(3) of the OBCA to compel the applicants to divulge DPI's financial records, to establish a current fair market value. Given the amount he paid Steven for the shares, it seems impractical to order an array of disclosure for the purpose of determining DPI's net value at inordinate cost. It would be fairer to require DPI to redeem the shares for the difference between the amount Peter incurred with Steven and the after-tax proceeds of the DPI bonus: $17,167.42. This outcome accomplishes the applicants' litigation aims, despite the dismissal of their claims. Kimberley would become the sole shareholder of DPI, and no current shareholder of DPI would be engaged in a commercially competitive activity.

[71] DPI would end up having paid the taxes on the bonus, but the bonus would have increased the cost base for the company's 2020 income tax calculations. In the wielding of a blunt equitable instrument, ordering DPI to redeem Peter's nine shares for $17,167.42 may not be correct from an accounting perspective. However, equity's concepts of fairness and protection of expectations tend to value categorical logic over exactitude.

[72] I therefore order DPI to redeem Peter's nine shares for $17,167.42.

Conclusion

[73] In the application, an order shall issue against Steven Jackson to disclose to the applicants, the records of 2131376's retail sales (defined as sales to individuals) from the beginning of July 2021 to the end of September 2022 ("period"). The records shall include the makes and models of the equipment and furniture sold to such individuals. Steven shall provide the disclosure within 30 days and shall verify it by affidavit. This could be a short time frame to perform the accounting from scratch, but Steven represented to the court that the relevant sales were minimal. This meant he had to have conducted a preliminary inquiry into the issue.

[74] DPI shall, within 30 days of receipt of disclosure from Steven, be entitled to obtain an appointment with an associate judge for an initial case conference for the conduct of a reference to calculate the profits made by 2131376 on patio equipment and furniture of comparable value to those sold by DPI during the same period.

[75] The scope of comparable value shall be set first by categorizing items by type and setting the ranges by the highest and lowest retail prices on DPI's stock list for the period. The associate judge will have full authority to establish a timetable for DPI to provide an expert accounting report, verified by affidavit, for Steven's responding expert report and affidavit, and the hearing of the reference. The associate judge's findings of liability between DPI and Steven shall be final and form part of this judgment.

[76] If, within 30 days of Steven's delivery of the accounting disclosure, DPI does not obtain an appointment with an associate judge, the accounting reference shall be deemed abandoned.

[77] In all other respects, the application is dismissed. Peter Jackson's counterapplication is granted to the extent of an order requiring DPI to redeem his nine shares in exchange for payment by DPI to Peter of $17,167.42.

[78] Costs of the application, not including the costs of the accounting reference, shall be determined after the exchange of written submissions. Because no party was entirely successful, the parties shall all serve and file their bills of costs and costs submissions, including any relevant offers to settle, within 30 days of the release of these reasons. A copy of these documents shall also be sent to my judicial assistant, by email.

Akazaki J.

Date: September 23, 2025.